REPORT 


OF  THE 


JOINT  LEGISLATIVE 
COMMITTEE  ON  TAXATION 


OF  THE 


STATE  OF, NEW  YORK 


TRANSMITTED  TO  THE  LEGISLATURE  FEBRUARY  14,  1916 


ALBANY 

J.  B.  LYON  COMPANY,  PRINTERS 
1916 


DOCUMENTS 
DEFT. 


REPORT 


OF  THE 


JOINT  LEGISLATIVE 
COMMITTEE  ON  TAXATION 


OF   THE 


STATE  OF  NEW  YORK 


TRANSMITTED  TO  THE  LEGISLATURE  FEBRUARY  14,  1916 


ALBANY 

J.  B.  LYON  COMPANY,  PRINTERS 
1916 


»'•*••'          *•    **'          I 


DOCUMENTS 
DEFT. 


CONTENTS 


Introduction  PAGE 

Joint  resolution  establishing  a  Committee 2 

Problems  facing  the  Committee 3 

General  scope  of  the  Committee's  investigation 4 

Procedure  of  the  Committee 5 

Part  I.    The  Revenue  Situation 9 

CHAPTER      I.    THE  STATE 91 

CHAPTER    II.    UP  STATE  CITIES -. 11 

NEW  YORK  CITY 13 

CHAPTER  III.    THE  TOWNS   20 

Part  II.    The  New  York  System  of  Taxation 21 

CHAPTER      I.    PECULIAR  FEATURES  OF  THE  NEW  YORK  TAX  LAW 21 

CHAPTER    II.    THE  FAULTS  OP  THE  NEW  YORK  SYSTEM  OF  TAXATION  .  23 
CHAPTER  III.    WHY  THE  PRESENT  SYSTEM  CANNOT  BE  RELIED  UPON 

FOR  THE  ADDITIONAL  NEEDED  REVENUE 26 

Part  III.    The  Failure  of  the  Personal  Property  Tax 31 

CHAPTER  I   31 

History  of  Tax  in  Europe 31 

Failure  in  the  United  States 32 

Report  of  the  Commission  of  Taxation,  Massachusetts,  1908 ....  32 

Report  of  Maryland  Commission,  1888 35 

Report  of  Kentucky  Special  Commission,  1912 36 

Report  of  Virginia  Tax  Commission,  1911 37 

Report  of  National  Tax  Association,  Vol.  IV 37 

Summary  of  reports  of  New  York  Commissions 38 

Report  of  1872 39 

Report  of  1893 40 

Report  of  1900 40 

Report  of  1907 40 

CHAPTER    II.    CAUSES  OF  THE  FAILURE  OF  THE  PERSONAL  PROPERTY 

TAX    41 

CHAPTER  III.     INJUSTICE  OF  THE  PERSONAL  PROPERTY  TAX 43 

As  between  tangible  and  intangible  personalty 44 

As  between  the  poor  and  the  wealthy 44 

Concerning  widows  and  orphans  and  trust  estates 45 

As  between  farmers  and  owners  of  other  forms  of  wealth 47 

Comparison  of  taxes  on  manufacturing  and  farms  in  California.  48 
Table    showing    comparison    of    aggregates    and    percentages    of 

investments  in  manufactures  and  agriculture  in  Minnesota ...  50 

Injustice  as  between  various  types  and  classes  of  enterprise ....  54 
[iii] 


679528 


CONTENTS 


PAGE 

Part  IV.    Failure  of  the  Personal  Property  Tax  in  New  York 55 

CHAPTER      I.    GENERAL  SCOPE  OF  THE  COMMITTEE'S  INVESTIGATION.  55 

CHAPTER    II.    PERSONAL  INVESTIGATION  IN  THE  Six  COUNTIES 59 

CHAPTER  III.     DECLINE  IN  THE  PERSONAL  PROPERTY  ASSESSMENT  IN 

NEW  YORK  STATE 66 

CHAPTER  TV*.     PERSONAL  PROPERTY  ASSESSMENT  IN  NEW  YORK  CITY.  68 
CHAPTER     V.     PERSONAL  PROPERTY   ASSESSMENT  IN   OTHER   CITIES 

AND  TOWNS 69 

CITIES 69 

TOWNS 71 

Part  V.    Failure  of  Section  12  (Introduction) 73 

CHAPTER      I.    WHAT  SECTION  12  Is 73 

CHAPTER    II.     IMPOSSIBILITY  OF  ENFORCING  SECTION  12 77 

CHAPTER  III.    INVESTIGATION  OF  2,500  CORPORATIONS 81 

CHAPTER  IV.  INVESTIGATION  OF  THE  COMMITTEE  BY  MEANS  OF  VOL- 
UNTARY RETURNS  OF  GENERAL  BUSINESS  CORPORA- 
TIONS    88 

CHAPTER  V.  FURTHER  INVESTIGATION  OF  THE  WORKING  OF  SECTION 
12  THROUGH  THE  MEANS  OF  VOLUNTARY  RETURNS  OF 

CORPORATIONS 91 

CHAPTER  VI.    How  CORPORATIONS  ESCAPE  THE  PERSONAL  PROPERTY 

TAX  IN  NEW  YORK  STATE 92 

LEGAL  MEANS  OF  ESCAPING  TAXATION 96 

CHAPTER  VII.  WHY  CORPORATIONS  ARE  IMPELLED  TO  EVADE  PER- 
SONAL PROPERTY  TAX 101 

Part  VI.    Taxation  of  Foreign  Corporations. 103 

The  law  regarding  the  taxation  of  personal  property  of  foreign 

corporations 103 

Failure  of  the  law 109 

Investigation  of  country  records 109 

Testimony  concerning  failure  of  the  personal  property  tax  in 

regard  to  foreign  corporations Ill 

Why  foreign  corporations  should  make  a  substantial  contribution 

to  the  support  of  State  and  local  government 113 

Part  VII.  New  York  System  of  Taxing  Manufactures 117 

CHAPTER      I.    STATE  TAX 117 

CHAPTER    II.    LOCAL  TAXATION  OF  MANUFACTURING  CORPORATIONS  ..   118 
CHAPTER  III.    NEW  YORK  MANUFACTURING  INDUSTRY  AS  A  TAXABLE 

BASE    119 

CHAPTER  IV.    YIELD  IN  NEW  YORK 126 

CHAPTER     V.    YIELD  OF  NEW  YORK  MANUFACTURING  CORPORATIONS 

UNDER  THE  FEDERAL  INCOME  TAX 129 

CHAPTER  VI.    NEW  YORK  COMPARED  WITH  OTHER  STATES : . . .   130 

CHAPTER  VII.  SUMMARY  AND  CONCLUSIONS  CONCERNING  THE  TAXA- 
TION OF  MANUFACTURING  CORPORATIONS 133 

Part  VIII.    Section  182..  .   137 


CONTENTS  v 

PAGE 

Part     IX.     The  Listing  System 143 

Report  of  Oregon  Special  Tax  Commission 144 

Report  of  1906  Washington  Commission 144 

Report  of  New  York  Special  Tax  Commission,  1907 144 

Drastic  laws  to  secure  disclosures  have  always  failed 145 

Report  of  Ohio  Commission,  1893 147 

Report  of  Kentucky  Special  Tax  Commission,  1914 ^.  148 

Part    X.    Miscellaneous  Business  Taxes 149 

Part  XI.    Some  Forms  of  Corporate  Taxation  Found  in  Other  States. . .  .  151 
The  franchise  tax  based  on  the  par  value  of  capital  stock,  such 

as  is  found  in  New  Jersey 151 

The  capital  stock  tax,  such  as  is  found  in  Pennsylvania 151 

The  corporate  excess  tax 153 

The  Wisconsin  Income  Tax 155 

Part  XII.    Substitutes  for  the  Personal  Property  Tax 161 

CHAPTER  I.     THE  ABILITY,  OB  PRESUMPTIVE  INCOME,  TAX 161 

Habitation  Tax  161 

Occupation  Tax    164 

Salaries  Tax    165 

Objections  to  Ability  Tax 167 

CHAPTEB    II.     THE  CLASSIFIED  PROPERTY  TAX 168 

CHAPTER  III.     THE  Low  RATE  OF  INTANGIBLES  . 170 

Arguments  for  the  low  rate  on  intangible  property 171 

Criticism  of  the  above  arguments 172 

Pennsylvania  low  rate  on  intangibles 172 

Results  of  Pennsylvania  experience  with  4-mill  tax 173 

Tax  upon  corporate  loan 174 

Conclusions  concerning  the  Pennsylvania  low  rate  on  intangibles.  174 

The  experiment  of  Maryland  with  the  low  rate  on  tangibles 175 

Results  of  Maryland's  experience  with  the  low  rate  on  intan- 
gibles   176 

Where  Maryland  law  has  failed 177 

Conclusions  concerning  the  Maryland  low  rate  on  intangibles.  177 

Connecticut's  experience  with  the  low  rate  on  intangibles 178 

Fiscal  results  of  the  tax  on  choses  in  action 179 

Minnesota's  experience  with  the  three-mill  tax  on  intangibles.  .  . .  180 

Conclusions  as  to  the  Minnesota  tax 181 

General  conclusions  concerning  the  low  rate  on  intangibles 181 

CHAPTER  IV.    THE  INCOME  TAX 184 

Experience  in  the  United  States  of  America 185 

Wisconsin  Income  Tax 186 

General  characterization  of  the  tax 186 

What  is  taxable  under  the  Wisconsin  income  tax 188 

What  is  not  taxable 188 

Definition  of  income ; 189 

Income  of  individuals  exempted  from  taxation 189 

Rates  of  Wisconsin  income  tax 189 

Administration 192 

Advantages  of  the  income  tax ,  . , 195 


vi  CONTENTS 

PAGB 

Conclusion 206 

General  conclusions   206 

Inheritance  tax    207 

Apportionment  of  excise  and  automobile  tax 210 

Federal  and  State  subjects  of  taxation 210 

Income  Tax  Bill 215 

Appendices 235 


STATE  OF  NEW  YORK 


No.  26 


IN     SENATE 

February  14,  1916 


Report   of   the   Joint    Legislative    Committee  on 

Taxation 


INTRODUCTION 

The  taxation  of  personal  property  in  the  State  of  New  York 
has  presented  a  serious  problem  for  the  last  fifty  years.  Prior 
to  1852,  because  of  the  low  rate,  the  burden  of  the  tax  does  not 
seem  to  have  been  seriously  felt,  nor  the  inequalities  which  have 
since  arisen  in  its  administration  to  have  existed.  However,  in 
1872,  the  rate  for  state  and  local  purposes  had  risen  to  three 
per  cent  and  the  defects  and  injustice  of  the  taxation  of  personal 
property  at  the  general  property  rate  became  more  and  more  ap- 
parent. The  situation  resulted  in  the  appointment  of  the  Com- 
mission of  1872,  which  was  one  of  the  first  of  the  many  com- 
missions that  have  investigated  and  reported  on  this  trouble- 
some problem.  This  problem  still  remains  unsolved. 

During  the  last  thirty  years  the  State  has  developed  a  system 
of  special  taxes  imposing  specific  taxes  upon  certain  classes  of 
personal  property  and  businesses,  withdrawing  them  thereby 
out  from  under  the  personal  property  tax.  Thus,  banks,  trust 
companies,  mortgages  and  motor  vehicles  are  all  free  from  the 
local  personal  property  tax  and  are  taxable  under  special  laws. 
But,  except  for  these  particular  classes,  the  great  mass  of  personal 
property  in  the  State  is  still  taxed  locally  at  the  same  rate  as 
real  estate,  and  under  the  same  rule  as  existed  a  half  century 
ago. 

This  was  the  situation  when,  in  the  year  1911,  the  Legislature 
enacted  what  is  known  as  the  Secured  Debt  Law,  under  the 
terms  of  which  certain  classes  of  securities,  to  wit,  bonds,  notes, 
debts  secured  by  mortgage  of  real  property  situated  in  any  State 
or  country  other  than  New  York,  or  secured  by  the  deposit  of 


2  :     STATE  OF  NEW  YORK 

securities  under  a  deed  of  trust,  or  any  bonds,  debentures  or 
notes  not  payable  within  a  year  from  their  date  of  issue,  were, 
upon  the  payment  of  a  tax  of  one-half  of  one  per  cent,  exempt 
from  all  taxation  during  the  life  of  the  security.  The  law  was, 
broadly  speaking,  modeled  on  the  Mortgage  Recording  Tax  Law, 
but  there  is  this  fundamental  difference  between  the  taxation 
of  so-called  secured  debts  and  of  mortgages:  the  tax  on  mort- 
gages is  paid  by  the  borrower,  whereas  the  holder  pays  the  tax  on 
secured  debts.  The  Secured  Debt  Law  cannot,  strictly  construed, 
be  considered  a  tax  measure,  for  the  payment  of  one-half  of  one 
per  cent  upon  a  security  which  may  run  for  fifty  years  is  so 
light  a  charge  as  to  amount  to  little  more  than  a  registration  fee. 
The  purpose  of  the  law  was  to  exempt,  rather  than  to  tax,  and 
unless  the  general  policy  of  the  State  can  be  said  to  contemplate 
the  relieving  from  taxation  of  the  great  and  increasing  accumu- 
lations of  wealth  represented  by  securities,  credits  and  other 
forms  of  intangible  property,  this  purpose  must  have  run  counter 
to  our  general  policy. 

The  law  was  not  only  disappointing  as  a  revenue  producer, 
but  in  the  opinion  of  many  constituted  an  unfair  discrimination 
in  favor  of  the  holders  of  a  particular  class  of  property.  The 
justness  of  this  opinion,  and  the  belief  that  it  represented  the 
sentiment  of  the  majority  of  the  people  of  the  State,  led  the 
Legislature  in  1915  to  repal  the  Secured  Debt  Law.  Various 
measures  were  introduced  as  substitutes,  which  contemplated 
sweeping  reforms  in  the  taxation  of  personal  property,  and  which 
involved  drastic  efforts  to  reach  securities  and  other  intangibles. 
The  Legislature,  however,  felt  that  the  time  at  its  disposal  was 
sufficient  neither  for  a  careful  study  of  so  important  a  sub- 
ject nor  for  an  adequate  disposition  thereof.  It  adopted,  there- 
fore, a  measure  of  a  temporary  character,  under  the  terms  of 
which  secured  debts,  upon  the  payment  of  three-quarters  of  one 
per  cent,  could  obtain  exemption  from  the  personal  property  tax 
for  a  period  of  five  years ;  and  by  joint  resolution  appointed  this 
Committee  to  study  the  subject  and  to  report  at  the  next  session 
of  the  Legislature.  The  joint  resolution  reads  as  follows : 

"  Eesolved  (if  the  Assembly  concur),  That  a  joint  legisla- 
tive committee  is  hereby  constituted  consisting  of  three 
senators,  to  be  appointed  by  the  president  of  the  senate, 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  3 

and  five  members  of  the  assembly,  to  be  appointed  by  the 
speaker  of  the  assembly,  to  examine  the  laws  of  this  state 
and  of  other  states  and  countries  relating  to  taxation;  to 
investigate  generally  in  respect  of  systems  and  methods  of 
taxation,  particularly  with  regard  to  the  best  methods  of 
equitably  and  effectually  reaching  all  property  which  should 
be  subjected  to  taxation  and  avoiding  conflicts  and  duplica- 
tion of  taxation  on  the  same  property;  and  to  prepare  the 
needed  legislation  to  carry  such  methods  into  effect  in  this 
State. 

"  Resolved,  That  such  committee  be  hereby  authorized  to 
sit  at  Albany  or  elsewhere  within  the  state,  to  choose  a  chair- 
man from  among  its  own  members,  to  employ  a  secretary  and 
counsel  and  such  other  assistants  as  may  be  needed,  to  take 
testimony,  subpoena  witnesses  and  compel  the  production  of 
books,  documents  and  papers,  and  otherwise  have  all  the 
powers  of  a  legislative  committee. 

"  Resolved,  That  such  committee,  on  or  before  February 
first,  nineteen  hundred  and  sixteen,  report  the  results  of 
its  investigation  to  the  legislature,  together  with  such  pro- 
posed legislative  measures  as  it  deems  advisable  to  carry  its 
recommendations  into  effect. 

"  Resolved,  That  the  expense  of  such  committee,  not  ex- 
ceeding fifteen  thousand  dollars,  be  payable  from  the  contin- 
gent fund  of  the  legislature  upon  the  certificate  of  the  chair- 
man of  such  committee." 

In  view  of  the  misapprehension  which  has  existed  in  some 
quarters  as  to  our  functions,  we  desire  to  state  what  we  believe 
those  functions  to  be.  The  Committee  does  not  understand  that 
it  was  appointed  with  a  view  to  developing  new  sources  of  revenue 
for  the  purposes  of  the  State  government,  but  rather  to  investi- 
gate the  relative  burden  borne  today  by  different  classes  of  prop- 
erty and  persons;  to  devise  ways  and  means  of  doing  away  with 
such  inequalities  as  exist,  more  particularly  in  so  far  as  the 
personal  property  tax  is  concerned,  both  in  its  application  to  indi- 
viduals and  to  corporations ;  and  to  present  to  the  Legislature  such 
a  plan  as  in  its  judgment  will  tend  to  equalize  present,  as  well  as 
future,  tax  burdens,  by  the  establishment  of  a  broader  tax  base 
and  a  fairer  distribution  of  those  burdens.  The  reasons  which 


4  STATE  OF  NEW  YOKE 

led  to  the  creation  of  this  Committee  and  the  terms  of  the  Reso- 
lution under  which  it  is  created,  seem  to  make  this  entirely  clear. 
The  study  of  the  relative  burdens  borne  by  the  different  classes 
of  property  and  taxpayers  necessarily  involved  an  examination 
of  the  financial  condition  of  the  State,  cities  and  other  localities, 
while  the  determination  of  the  best  remedies  called  for  a  careful 
study  of  the  tax  systems  of  foreign  countries  and  other  American 
States,  and  more  particularly  of  the  recent  reforms  which  have 
taken  place  in  many  of  the  latter.  The  time  available  to  the 
Committee  rendered  it  impossible  to  make  a  complete  analysis  of 
all  the  classes  involved.  Such  investigation  would  have  required 
the  study  of 

(a)  Public  service  corporations,  including  railways,  car 
companies,  telegraph  and  telephone  companies,  rapid  transit 
companies,  gas,  electric  light,  water  and  power  companies; 

(b)  Financial  corporations,  including  commercial  banks, 
trust  companies,  savings  banks,  fire,  life  and  miscellaneous 
insurance  companies; 

(c)  General  business  corporations,  including  manufactur- 
ing  companies,    mercantile   companies     and    miscellaneous 
companies. 

The  time  required  by  similar  investigations  in  other  states  — 
for  example:  Virginia,  one  and  a  half  years;  Connecticut,  two 
years ;  Kentucky,  one  and  a  half  years ;  California,  two  years  - 
made  it  clear  that  it  would  be  impossible  for  the  Committee  to 
undertake  the  complete  task  and  at  the  same  time  to  report  by 
February  1,  1916.  The  CcymTnit.tp.ft  felt  justified,  therefore,  in 
postponing  for  further  consideration  —  if  the  Legislature  deems 
this  to  be  desirable — (a)  the  taxation  of  public  service  corpo- 
rations, (b)  the  taxation  of  financial  corporations,  etc. 

The  Committee  devoted  its  attention  to 

(a)  An  investigation  of  the  personal  property  tax,  the 
causes  of  its  failure,  and  possible  remedies  or  substitutes, 
involving  a  study  of  systems  tried  elsewhere ; 

(b)  The  reform  of  the  taxation  of  general  business  cor- 
porations, including  mercantile,  manufacturing  and  miscel- 
laneous, involving  a  study  of  the  principal  methods  of  taxing 
general   business   corporations   in   the   principal    States   of 
the  Union ; 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  5 

(c)   The  revenue  to  be  derived  from  any  new  methods  of 
taxation,  including 

(1)  The  yield  of  the  various  substitutes  for  the  personal 
property  tax,  such  as  the  'Classified  Property  Tax,  the  Habita- 
tion,  Occupation  and  Salary  Taxes,  the  Income  Tax  and 
Miscellaneous  Business  Taxes ; 

(2)  The  yield  of  a  tax  on  manufacturing,  mercantile  and 
general  business  corporations,  according  to  methods  used  in 
other  States. 


PROCEDURE  OF  THE  COMMITTEE 

The  Committee  met  for  the  purpose  of  organization  in  Albany 
on  July  9,  1915.  Senator  Ogden  L.  Mills  was  elected  Chairman; 
Assemblyman  Frank  B.  Thorn  was  elected  Vice-Chairman ; 
Assemblyman  H.  Edmund  Machold  was  elected  Secretary; 
Charles  R.  Hotaling  was  elected  Sergeant-at-Arms  and  William 
R.  Weed  was  chosen  Clerk  to  the  Committee.  At  a  subsequent 
meeting  Bronson  Winthrop,  Esq.,  was  selected  as  Counsel-in- 
Chief,  and  Walter  Lindner,  Esq.,  Henry  M.  Powell,  Esq.,  and 
Robert  C.  Gumming,  Esq.,  were  selected  as  Associate  Counsel  to 
the  Committee.  Professor  H.  A.  E.  Chandler  was  selected  as 
Tax  Expert  and  Advisor  to  the  Committee.  Upon  the  resignation 
of  Frank  B.  Thorn,  Assemblyman  William  W.  Chace  was  ap- 
pointed by  the  Speaker  as  a  member  of  the  Committee  and 
Assemblyman  Edward  A.  Everett  was  elected  Vice-Chairman. 

The  Committee  established  an  office  at  9  East  84th  street, 
New  York  City.  The  chairman  collected  all  of  the  important 
and  more  recent  reports  of  the  special  tax  commissions 
appointed  in  the  different  states  of  the  Union,  and  the  annual 
and  special  reports  of  the  various  tax  commissions  in  other 
states,  together  with  such  works  as  would  enable  the  Committee 
to  familiarize  itself  with  the  tax  systems  of  European  countries. 
Letters  requesting  their  advice  and  suggestion  were  written  to 
the  leading  tax  experts  throughout  the  country,  and  to  the  boards 
of  supervisors,  to  the  boards  of  assessors  of  the  cities  of  the  State, 
to  the  county  treasurers,  to  the  mayors  of  the  cities  of  the  State, 
to  the  State  Grange,  to  the  boards  of  trade  and  chambers  of 


6  STATE  OF  NEW  YORK 

commerce  and  merchants'  associations  throughout  the  State,  to 
all  individuals  interested  in  the  subject  of  taxation  in  the  State 
and  to  those  who  had  attended  the  various  New  York  State  Con- 
ferences. Numerous  conferences  have  been  held  with  tax  experts 
in  New  York  and  neighboring  states.  In  addition,  specific  ques- 
tionaires  were  sent  to  every  county  and  to  every  city  in  the  State, 
for  the  purpose  of  obtaining  information  as  to  the  workings  of 
the  personal  property  tax.  This  was  supplemented  in  six  coun- 
ties by  personal  investigations. 

A  questionaire  was  sent  to  500  of  the  leading  foreign  and 
domestic  corporations  doing  business  in  the  State,  requesting  such 
information  as  would  enable  the  Committee  to  determine  what 
property  of  those  corporations  was  actually  liable  to  personal 
property  taxation  and  what  taxes  were  actually  being  paid.  In 
this  particular  field  the  Committee  received  great  assistance  from 
the  Associated  Manufacturers  and  Merchants  Association  of  the 
State. 

The  Committee  held  public  hearings  in  New  York  City  during 
the  month  of  October,  at  which  city  and  State  officials,  real  estate 
owners,  representatives  of  the  Merchants  Association,  of  the 
Chamber  of  Commerce,  of  various  taxpayers',  and  civic  associa- 
tions, of  the  Savings  Bank  Association,  of  the  Investment  Bank- 
ers Association,  leading  business  men  and  experts  on  taxation, 
presented  their  views.  At  the  conclusion  of  these  hearings  and 
prior  to  the  hearings  held  up-State,  the  Committee  issued  a  state- 
ment which  contained  a  brief  summary  of  the  evidence  presented 
to  the  Committee,  together  with  the  three  principal  plans  which 
had  been  suggested  as  substitutes  for  the  personal  property  tax, 
and  invited  criticism  and  suggestions  on  the  part  of  the  public. 
This  statement  was  sent  to  the  various  chambers  of  commerce 
and  boards  of  trade  throughout  the  State,  to  the  State  Grange, 
and  to  all  the  newspapers  of  the  State,  with  the  request  that  it 
be  published. 

During  the  latter  part  of  November  and  the  early  part  of 
December,  hearings  were  held  in  Syracuse,  Kochester  -and  Buffalo, 
at  which  the  city  and  county  officials,  the  Secretary  of  the  State 
Grange,  the  representatives  of  the  chambers  of  commerce,  the 
Committee  of  the  Associated  Manufacturers  and  Merchants  of 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  7 

the  State,  real  estate  owners  and  operators,  leading  merchants 
and  business  men,  and  Francis  M.  Lamon,  Secretary,  Northern 
New  York  Development  League,  were  heard. 

The  Committee  returned  to  New  York  where  a  brief  hearing 
was  held,  at  which  Professor  Bullock  of  Harvard  University 
presented  his  views  to  the  Committee  and  explained  the  tax  situa- 
tion in  Massachusetts,  and  Professor  Adams,  formerly  of  the 
University  of  Wisconsin  and  a  former  tax  commissioner  of  the 
State  of  Wisconsin,  described  the  workings  of  the  Wisconsin 
income  tax,  and  presented  his  views  on  the  New  York  situation. 
At  this  hearing  resolutions  were  presented  on  behalf  of  the 
Merchants  Association,  the  Committee  on  Taxation  of  the  New 
York  Chamber  of  Commerce,  and  the  Special  Committee  on 
Taxation  appointed  by  the  Mayor  of  the  City  of  New  York, 
endorsing  the  income  tax  as  a  substitute  for  the  personal  prop- 
erty tax. 

The  Committee  desires  to  acknowledge  the  assistance  it  has 
received,  more  particularly  from  Professor  E.  R.  A.  Seligman  of 
Columbia  University,  Professor  T.  S.  Adams  of  Cornell  Uni- 
versity, Hon.  Lawson  Purdy,  President  of  the  Department  of 
Taxes  and  Assessments  of  New  York  City,  Alfred  E.  Holcomb, 
Esq.,  Treasurer,  National  Tax  Association,  Professor  Charles  J. 
Bullock  of  Harvard  University,  and  A.  C.  Pleydell,  Esq.,  of  the 
New  York  Tax  Reform  Association.  The  Committee  desires  also 
to  acknowledge  the  assistance  which  it  has  derived  from  the 
cordial  co-operation  of  the  Special  Committee  on  Taxation 
appointed  by  the  mayor  of  the  city  of  New  York;  of  the  Com- 
mittee on  Co-operation  consisting  of  representatives  of  the  various 
real  estate  associations,  the  Trust  Company  Association,  the  Sav- 
ings Bank  Association,  the  Association  of  Insurance  Presidents, 
the  Merchants'  Association  and  of  the  New  York  'Chamber  of 
Commerce;  of  the  Associated  Manufacturers  and  Merchants  As- 
sociation of  the  State  of  New  York ;  of  the  Rochester  Chamber  of 
Commerce  and  of  the  press  of  the  State,  which  has  been  of  ma- 
terial aid  in  presenting  to  the  people  the  various  plans  suggested 
as  substitutes  for  the  personal  property  tax,  and  in  keeping  the 
public  in  touch  with  the  work  of  the  Committee. 


8  STATE  OF  NEW  YORK 

The  Chairman  acknowledges  the  very  great  assistance  he  has  re- 
ceived from  Professor  H.  A.  E.  Chandler  in  the  preparation  of  this 
report.  Mr.  Chandler  has  been  in  constant  touch  with  the  work 
of  the  Committee,  has  had  charge  of  much  of  the  original  in- 
vestigation 'and  has  made  valuable  contributions  to  the  writing  of 
the  report  itself. 


PART  I 
THE  REVENUE  SITUATION 

The  success  or  failure  of  the  personal  property  tax  is  directly 
connected  with  the  rate  of  the  tax.  Given  a  very  low  rate,  it  can 
be  administered  more  or  less  satisfactorily  and  with  comparative 
fairness  and  equality.  Thus  when,  as  in  1852,  the  rate  in  this  State 
for  both  State  and  local  purposes  was  but  7  mills  on  the  dollar, 
there  was  little  or  no  complaint.  But  let  the  rate  rise  to  1%  or 
2  per  cent,  and  the  inequalities  and  injustice  become  well-nigh 
unbearable.  Experience  has  conclusively  shown  that  a  personal 
property  tax  at  a  2  per  cent  rate  is  bound  to  be  an  absolute  and 
complete  failure,  and  to  the  extent  that  it  does  succeed,  grossly 
unjust. 

It  is  pertinent,  therefore,  to  examine  the  rates  in  New  York 
State  and  to  determine  the  likelihood  of  an  increase  or  decrease 
by  an  examination  of  the  financial  situation  of  the  State  and  of 
the  localities.  In  so  far  as  the  latter  are  concerned,  we  have  con- 
fined our  investigation  for  the  most  part  to  the  cities,  because  it  is 
in  the  cities  principally  that  we  find  the  largest  aggregates  of 
wealth  in  the  form  of  personal  property,  and  because,  broadly 
speaking,  it  is  in  the  cities  that  the  tax  problem  is  most  acute. 

CHAPTER  I 
THE  STATE 

The  average  tax  rate  in  the  'State  for  the  year  1914  was  .018995 
or  approximately  $1.90  per  $100  of  valuation.  In  the  cities  the 
tax  rate  ran  in  the  year  1914  from  .0166  in  Geneva  to  .0655  in 
Port  Jervis. 

These  figures  do  not  include  a  direct  State  tax,  and  yet  the 
steady  increase  in  the  cost  of  State  government  and  the  probability 
that  the  present  indirect  sources  of  revenue  have  reached  approxi- 
mately their  maximum  yield,  suggest  that  the  direct  State  tax 
may  well  become  a  permanent  part  of  our  revenue  system. 

The  expenditures  for  the  general  purposes  of  -State  government, 
exclusive  of  interest  on  the  canal  and  highway  debts  and  of  the 
free  school  fund  and  sinking  and  trust  funds,  have  increased  from 
$7,163,831.18  in  1885  to  $42,408,488.24  in  1914,  or  an  increase 


10  STATE  OF  NEW  YORK 

of  nearly  500  per  cent  in  thirty  years.  In  the  meanwhile  the 
population  of  the  State  has  increased  82  per  cent  and  the  assessed 
value  of. real  and  personal  property  liable  to  taxation  274  per 
cent  The  per  capita  cost  of  government  has  risen  from  $2.47  in 
1895  to  $5.41  in  1914,  or  an  increase  of  235  per  cent  during  a 
period  when  the  population  of  the  State  increased  but  53  per  cent. 

From  1903  to  the  present  time  the  net  debt  of  New  York  State, 
over  and  above  all  sinking  funds,  has  increased  from  $7,400,000 
to  over  $148,051,000.  The  funded  debt  outstanding  today  is  over 
$186,000,000,  and  in  the  last  election  the  people  authorized  an 
additional  indebtedness  of  $27,000,000.  Thus  the  per  capita  net 
State  debt  has  arisen  from  94  cents  in  1903  to  $15.04  in  1915. 

The  total  appropriations  for  the  general  purposes  of  govern- 
ment, including  sinking  fund  contributions,  aggregate  for  the  last 
five  years  $263,149,265.50,  and  exclusive  of  sinking  fund  contribu- 
tions, $225,244,800.77 ;  while  the  income  from  sources  other  than 
the  direct  State  tax  aggregates  but  $211,049,892.59.  For  the 
last  five  years  the  appropriations  for  the  general  expenses  of 
government,  exclusive  of  sinking  fund  charges,  have  averaged  in 
round  numbers  $45,048,960,  and  including  sinking  fund  con- 
tributions, $52,629,853.10.  The  yield  of  the  indirect  taxes  and 
of  sources  other  than  the  direct  State  tax,  has  averaged  in  round 
numbers  but  $42,209,978.51  for  the  last  five  years.  The 
Comptroller  estimates  that  the  debt  service  for  the  next  five  years 
will  cost  as  follows : 

1916-1917 $12,576,684  42 

1917-1918 13,155,718  05 

1918-1919 13,734,751  68 

1919-1920 14,313,785  31 

1920-1921 14,892,818  94 

To  this  must  be  added  increased  maintenance  charges  for  the 
State  highways  and  the  Barge  canal,  which,  when  both  are  com- 
pleted, will  represent  an  increase  per  annum  of  $2,740,000.  Under 
these  circumstances  it  is  hard  to  escape  the  conclusion  that,  unless 
new  indirect  sources  be  devised,  a  direct  State  tax  for  the  purposes 
of  the  debt  service  at  least  must  be  included  in  estimating  future 
local  rates,  even  assuming  that  the  most  rigid  economy  be 
practiced. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  11 

That  such  economy  is  highly  desirable  is  not  open  to  dispute, 
and  yet  in  estimating  possible  reductions  in  future  expenditures 
for  State  purposes,  it  is  well  to  remember  that  many  new  func- 
tions have  been  assumed  by  the  State  government  under  a  policy 
demanded  by  the  people,  a  policy  which  calls  not  only  for  in- 
creased service,  but  for  service  of  a  better  quality.  Thus,  for 
instance,  greater  opportunities  for  education  are  offered  today 
than  ever  before;  large  sums  are  annually  appropriated  for  the 
encouragement  of  agriculture  and  for  the  development  of  scien- 
tific farming;  there  has  been  a  large  increase  in  the  number  of 
those  confined  in  our  penal  and  correctional  institutions  and  State 
hospitals,  at  the  same  time  the  construction  and  reconstruction  of 
hospitals,  prisons  and  other  public  buildings  is  paid  from  current 
income;  huge  sums  have  been  voted  by  the  people  for  the  acqui- 
sition of  Palisades  Park  and  for  the  construction  of  thousands  of 
miles  of  improved  highways  and  of  a  barge  canal,  the  latter  two 
of  which  add  materially  to  the  annual  financial  burden,  not  only 
for  interest  and  amortization  charges  but  for  maintenance  and 
repair.  Unless,  therefore,  the  people  of  the  State  desire  a  com- 
plete change  of  public  policy,  and  are  prepared  to  limit  the 
activities  of  government,  there  is  little  likelihood,  with  the  grow- 
ing population  and  with  the  increased  complexities  of  modern 
life,  of  any  material  decrease,  no  matter  what  administrative 
economies  may  be  effected. 

This  is  borne  out  by  the  experience  of  other  states  and  of  the 
Federal  government  and  of  all  foreign  countries  that  have  accepted 
modern  democratic  reforms  with  the  new  demands  which  they 
make  upon  government.  The  cost  of  the  Federal  government 
for  thirty  years  prior  to  1908  increased  nearly  400  per  cent, 
while  the  population  increased  but  84  per  cent.  The  average 
cost  of  government  of  all  of  the  states  of  the  Union  increased 
105.9  per  cent  from  1903  to  1913,  according  to  the  Federal 
Census,  while  the  population  of  the  states  rose  only  20  per  cent. 


CHAPTER  II 
THE  CITIES 

Turning  now  to  the  cities,  we  find  a  similar  situation.  The 
cost  of  government  and  the  bonded  indebtedness  of  almost  every 
city  in  the  State  have  risen  steadily  year  by  year.  In  the  Ap- 


12  STATE  OF  NEW  YOIIK 

pendix  will  be  found  tables  showing  the  per  capita  bonded  in- 
debtedness, the  per  capita  municipal  taxes  on  property,  and  the 
per  capita  expenditures  for  municipal  purposes  of  the  cities  of 
the  State  in  the  year  1913,  giving  the  same  figures  in  the  case 
of  the  16  principal  cities  for  the  years  1902  to  1913.  These 
summaries  show  that  the  per  capita  indebtedness  of  cities  having 
over  30,000  inhabitants,  excluding  Amsterdam  and  Niagara 
Falls,  averaged  in  1890,  $21.35;  in  1902,  $47.-05 ;  in  1913, 
$59.82,  or  an  increase  in  1913  over  1890  of  180.15  per  cent. 
In  Amsterdam  the  per  capita  indebtedness  decreased  14.5  per 
cent  from  1902  to  1913,  and  in  Niagara  Falls  increased  from 
1902  to  1913,  29.2  per  cent.  In  Albany.,  Auburn,  Binghamton, 
Buffalo,  Elmira,  Eochester,  Schenectady,  Syracuse,  Troy,  Utica 
and  Yonkers,  the  per  capita  municipal  taxes  on  property  averaged 
in  1913,  $14.64;  in  1902,  $10.79,  or  an  increase  for  1913  over 
1902  of  35.72  per  cent.  The  per  capita  expenditures  for  muni- 
cipal purposes  for  these  same  cities  averaged  in  1902,  $18.49  and 
in  1913,  $25.11,  showing  an  increase  for  1913  over  1902  of 
35.81  percent. 

A  careful  study  of  the  tables  unquestionably  shows  that  there 
has  been  a  marked  upward  tendency  in  practically  all  of  the 
cities,  a  tendency  so  universal  that  it  cannot  be  fairly  attributed 
to  governmental  extravagance.  In  our  judgment  the  explanation 
will  be  found  in  the  fact  that  the  increased  expenditures  have 
been  incurred  in  response  to  the  demands  of  the  citizens  of  the 
localities  for  better  service  and  for  the  assumption  by  the  muni- 
cipal government  of  duties  unthought  of  by  previous  generations. 
Indeed,  this  was  the  almost  unanimous  opinion  of  those  who  ap- 
peared before  us.  There  are  but  few  cities  in  the  State  that  in 
recent  years  have  not  improved  their  lighting  systems,  repaved 
their  streets,  constructed  new  sewers,  built  school  buildings  of  the 
most  modern  type,  and  in  general  undertaken  a  comprehensive  \ 
system  of  public  improvements  which,  however  desirable  they 
may  be,  and  however  they  may  add  to  the  comfort  and  enjoy- 
ment of  the  inhabitants,  necessarily  mean  an  increased  bur- 
den to  the  taxpayers.  As  a  result,  the  tax  rate  is  so  high  as  to 
preclude  the  effective  administration  of  the  personal  property 
tax,  and  the  full  weight  of  the  increase  has  fallen  on  the  owners 


. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  13 


real  estate.  Without,  at  this  time,  discussing  the  equities  of 
the  situation  as  between  the  owners  of  real  and  of  personal 
property,  it  is  fair  to  say  that,  with  the  possible  exception  of  the 
City  of  New  York,  in  most  cases  the  increase  in  value  of  real 
estate  has,  to  a  great  extent,  taken  care  of  these  increased  taxes. 
This  is  still  the  case  as  far  as  we  can  ascertain  in  the  majority  of 
the  up-state  cities,  but  if  the  cost  of  government  continues  to 
increase  during  the  next  decade  at  the  rate  that  it  has  in  the 
last,  these  cities  will  unquestionably  face  as  serious  a  situation  as 
now  confronts  the  owners  of  real  estate  in  the  City  of  New  York, 
unless  in  the  meanwhile  some  measure  can  be  devised  to  compel 
the  owners  of  personal  property  to  contribute  their  share. 

The  increase  in  the  debt  of  the  City  of  New  York  since  Decem- 
ber 31,  1905,  is  shown  in  the  following  table: 

Gross  Funded  Debt  (exclud-     Dec.  31,  1905       Dec.  31,  1915  Increase 

ing  General  Fund  Bonds)     $565,  056,  512     $1,  155,  479,  156         $590,  422,  643' 

Net  Funded  Debt  (held  by 
the  public)  424,  675,  900  979,  750,  749  555,  074,  848 

Amount  of  Gross  Funded 
Debt  which  is  self-sus- 
taining (not  included  in 
computation  cf  debt 
limit)  27,113,879  322,525,502  295,411,623 

This  net  increase  of  $590,000,000  in  the  gross  funded  debt 
is  due  principally  to  the  initiation  and  construction  of  the  new 
dual  subway,  the  Catskill  Water  Supply  System,  and  exten- 
sions to  the  city's  other  systems  of  water  supply.  The  bonds 
issued  during  this  decade  on  account  of  the  new  subway  amount 
to  $112,500,000,  and  on  account  of  the  construction  and  exten- 
sions of  the  city's  greater  water  supply  system  $182,910,000; 
the  amount  issued  for  dock  development  during  this  same  period 
has  been  $64,150,000,  making  a  total  of  $359,560,000  for  rev- 
enue producing  purposes.  In  addition,  there  were  issued  $27,- 
500,000  of  assessment  bonds  which  will  be  redeemed  from  the 
assessments  collected.  The  other  large  items  of  increase  in  the 
city  debt  -are  $84,250,000  for  streets,  sewers  and  the  elimination 
of  grade  crossings;  $79,850,000  for  public  buildings;  $73,450,000 
for  schools,  libraries  and  sites,  and  $45,300,000  mainly  for 
bridges  crossing  the  East  river  so  that  the  four  boroughs 


14  STATE  OF  NEW  YORK 

be  physically  connected  and  the  Greater  City  become  one  city  in 
fact.  During  the  ten  years  under  review,  the  city  has  redeemed 
$135,000,000  of  its  funded  debt. 

The  city  debt,  however,  will  not  increase  in  any  such  ratio 
during  the  next  decade.  The  adoption  of  the  "  pay-as-you-go  " 
policy  and  the  determination  of  the  present  city  administration 
to  curtail  new  authorizations  of  corporate  stock  as  evidenced  by 
the  authorizations  of  1914  and  1915  have  already  checked  the 
growth  of  the  city's  debt.  The  average  annual  authorizations  and 
allotments  of  corporate  stock  throughout  the  10-year  period,  1906 
to  1915,  for  revenue  and  non-revenue  producing  purposes  are 
shown  below : 

AVERAGE  ANNUAL  AUTHORIZATIONS  OF  CORPORATE  STOCK 

Distribution 


Administration     Period  Amount 

McClellan  4  yrs.  $102,  417, 114  63 

Gaynor    4  yrs.       87,  951,  998  46 

Mitchel,    1914...     1  yr.        14,594,67048 


Revenue 
Producing 
$51,663,423  62 
56,311,014  23 
5,  636,  583  30 


Non-Revenue 

Producing 
$50,753,691  01 
31,  640,  984  23 
8,958,087  18 


Mitchel,    1915...      1  yr.        11,585,98169         3,545,07056         8,040,91113 


Administration     Period 

McClellan  4  yrs. 

Gaynor    4  yrs. 

Mitchel,    1914...     1  yr. 
Mitchel,    1915...     1  yr. 


AVERAGE  ANNUAL  ALLOTMENTS  OF  CORPORATE  STOCK 

Distribution 

Revenue  Non-Revenue 

Amount  Producing  Producing 

$64,  871,  366  72  $23,  978,  468  18  $40,  892,  898  54 

79, 164, 221  21   42,  575,  322  26   36,  588,  898  95 

62,  234,  689  52   40,  823,  620  55  21,  411,  068  97 

57,  226,  931  38   40,  378,  105  56   16,  848,  825  82 


The  1916  budget,  excluding  the  direct  State  tax,  is  $198,981,- 
155.81,  a  net  decrease  of  $8,630.71  below  the  budget  for  1915, 
and  an  increase  of  $82,175,655.44  above  the  1906  budget.  The 
budget  for  1916,  including  the  direct  State  tax  of  $13,975,021.73 
is  an  increase  of  $96,150,687.17  over  1906. 

The  two  following  tables  show  in  summary  form  the  budget  for 
1906  and  1916  and  the  city's  population,  together  with  the 
amount  and  percentage  of  increase : 


JOINT  LEGISLATIVE   COMMITTEE  ON   TAXATION  15 

BUDGET 
Item 
No.  1906  1916 

1  Expenses  of  city  government,  exclud- 

ing charitable  institutions $53',  240,  226  84         $78,  075,  306  43 

2  Education 23,  938,  006  69          41,  107,  19&  32 

3  Charitable  institutions    3,  456,  056  44  5,  483,  875  00 


4  Total  City  Government $80,  634,  289  97  $124,666,37975 

5  Total  County  Government 4, 151,  360  50  7, 101,  565  95 

6  Debt  service 31,116,20721  63,213,21011 

7  Tax  deficiencies 4,  000,  000  00 

8  Direct  State  Tax..                                            903,632  69  13,975,021  73 


9     Grand   Total    $116,  805,  490  37  $212,  956,  177  54 

Population 

10     Population 4,  166,  556  5,  742,  999 

COMPARISON  1916  WITH  1906 

Increase 

Item  Average  Annual 

No.                                             Amount                             Per  cent  Per  cent 

1 $24,835,07959                         46.647  4.665 

2 17,169,19163                        71.724  7.172 

3 2,027,81856                         58.674  5.867 


$44,032,08978  .                   54.607  5.461 

5 2,950,20545  71.066  7.107 

6 32,097,00290  103.152  10.315 

7 4,000,00000  

13,071,38904  1446.538  144.654 


• 


$96,150,68717  82.316  8.232 


Population 
10 1,576,443  37.836  3.784 

The  above  tables  show  that  the  average  annual  increase  in  the 
total  expense  of  city  government  has  been  8.23  per  cent,  whereas 
the  average  annual  increase  in  population  has 'been  3.784  per  cent. 

The  average  annual  increase  in  the  expense  of  city  government 
would  more  nearly  approximate  or  possibly  be  even  less  than  the 
average  annual  increase  in  population  were  it  not  for  the  fact 
that  until  recent  years,  commencing  about  1910,  many  of  the 
current  maintenance  charges  of  city  government  were  not  paid 
from  the  tax  budget  but  from  the  proceeds  of  the  sale  of  corporate 
stock.  The  budgets  from  1910  to  1916  inclusive,  contain  appro- 


16  STATE  OF  NEW  YOKK 

priations  in  substantial  amounts  for  a  number  of  debts  which 
formerly  were  not  included  in  the  annual  tax  budget.  The 
chief  example  is  the  Department  of  Docks.  Prior  to  the  year 
1910,  all  annual  maintenance  charges  for  that  department  were 
charges  against  corporate  stock.  In  order  to  correct  this  unsound 
method  of  financing,  the  first  appropriation  in  the  tax  budget  for 
the  department  was  made  in  the  1910  budget  in  the  amount  of 
$2,821,932,  and  the  amount  in  the  1916  budget  for  this  depart- 
ment is  $1,501,549. 

Although  the  cost  of  administrative  departments  under  the 
jurisdiction  of  the  Mayor  and  the  Board  of  Estimate  for  1916  has 
been  decreased  by  $3,125,904.29  since  1914,  the  total  of  the 
budget  has  increased,  and  according  to  the  testimony  of  the  Mayor 
and  the  Comptroller  of  the  city  before  this  Committee,  will  con- 
tinue to  increase  principally  on  account  of  the  adoption  of  the 
"  pay-as-you-go "  policy.  The  Comptroller  estimates  that  the 
budget  for  the  next  three  years  will  be  approximately  as  follows : 

1917 $204,439,623 

1918 207,233,298 

1919 221,299,848 

Mayor  Mitchel's  estimates  are'  somewhat  higher.  He  estimates- 
that  the  city  will  have  to  raise,  exclusive  of  the  direct  State  tax, 
for  the  purpose  of  interest  on  serial  bonds,  redemption  of  serial 
bonds  and  the  quota  of  public  improvements,  and  beginning  with 
1918  interest  on  subway  bonds,  the  following  amounts,  which 
are  additional  to  its  present  budget  of  $198,989,786.52  for  1915: 

1917 $10,137,000 

1918 19,400,000 

1919 34,719,000 

1920 34,554,000 

Bearing  In  mind  that  New  York  City  realty  is  assessed  at  practi- 
cally full  value,  if  to  this  burden  be  added  a  direct  State  tax, 
there  is  no  question  that  the  tax  rate  will  'soar  to  a  height  rarely 
known  in  this  country.  The  consequences  of  this  no  man  can  fore- 
see, but,  in  any  event,  they  cannot  with  safety  be  minimized 
or  brushed  aside.  It  is  only  fair  to  say  that  the  estimated  increase 
will  not  be  due  to  any  increase  in  the  general  cost  of  administra- 
tion, but  will  result  principally  from  the  adoption  of  what  is- 


JOISTT  LEGISLATIVE   COMMITTEE  ON   TAXATION  17 

known  as  the  "  pay-as-you-go  "  policy — a  method  recently  adopted 
as  a  more  scientific  and  proper  way  of  financing  public  improve- 
ments. 

The  testimony  of  the  experts  in  many  lines  of  trade  and  com- 
merce all  points  unmistakably  to  the  fact  that  this  great  and 
increasing  burden  has  been  borne  largely  by  one  class  of  in- 
dividuals, to  wit,  the  real  estate  owners  and  their  tenants.  When- 
ever the  real  estate  owner  is  able  to  shift  the  tax  to  the  tenant,  it 
falls  with  the  greatest  weight  on  those  least  able  to  pay,  because 
of  the  fact  that  a  much  larger  percentage  of  their  income  is  paid 
for  rent  by  the  poor  than  by  the  rich.  If,  on  the  other  hand,  the 
owner  of  real  estate  is  unable  to  shift  the  tax,  the  new  burden 
may  amount  to  a  decrease  of  his  income,  and  therefore  to  a  fall 
in  the  capital  value  of  the  real  estate. 

At  the  New  York  hearings  it  was  the  opinion  of  those  most 
familiar  with  real  estate  in  ]STew  York  City  that  this  class  of 
property  was  overtaxed,  that  its  value  was  in  danger  of  being 
seriously  impaired,  and  that  the  situation,  generally  speaking, 
was  critical.  For  example,  Mr.  Alfred  Marling  testified: 

"  I  can  say  without  any  hesitation,  based  on  my  38  years  ex- 
perience as  a  real  estate  broker,  appraiser  and  manager  in  this 
city,  that  real  estate  is  down  on  its  back,  and  it  cannot  stand 
any  more  burden  —  absolutely  none.  There  is  no  doubt  whatever 
on  that  point  in  my  mind.  (Q)  If  these  new  taxes  were  imposed, 
what  would  be  the  effect?  (A)  Trouble,  distress  of  all  sorts. 
It  would  be  practically  confiscation  to  the  poor  property  owner. 
He  is  gasping,  breathless,  now.  (Q)  You  consider  the  situation 
serious?  (A)  I  certainly  do." 

The  facts  and  figures  submitted  by  the  real  estate  men  are 
interesting  and  significant:  it  was  shown  that  the  tax  levy  for 
1915  upon  real  estate,  including  land,  buildings,  special  fran- 
chises and  real  estate  of  corporations,  amounted  to  77  per 
cent  of  the  1915  budget,  while  personal  property  paid  but  3.3 
per  cent.  One  group  of  11  parcels  of  real  estate  paid  30  per  cent 
of  net  income  in  taxes.  Another  group  of  seven  paid  41  per  cent 
in  taxes.  The  average  percentage  of  net  income  paid  in  taxes 
by  the  entire  Astor  estate  in  Manhattan  was  in  1885,  29.3  per 
cent ;  1904,  31.6  per  cent ;  1909,  30  per  cent  and  1914,  3*.  per  cent. 


18  STATE  OF  NEW  YORK 

Their  property  in  Manhattan  represents  an  assessed  value  of 
over  fifty  million  dollars,  and  consists  of  parcels  located  all  over 
the  borough,  and  used  for  all  kinds  of  purposes,  from  business 
to  residential.  An  investigation  made  by  Mr.  Stewart  Browne, 
who  appeared  before  the  Committee,  shows  that  400  parcels 
paid  30  per  cent  more  in  taxes  than  ten  years  ago,  while  rentals 
decreased  25  per  cent.  The  same  gentleman  estimates  that  the 
aggregate  net  income  received  on  improved  property  in  Manhattan 
does  not  exceed  3%  per  cent  on  assessed  valuations  and  4%  per 
cent  in  outlying  boroughs. 

Equally  significant  was  the  testimony  with  reference  to  the 
borough  of  Brooklyn.  We  quote  from  the  testimony  of  Mr. 
William  M.  Greve: 

"  We  have  taken  into  consideration  133  dwelling  houses,  49 
flats,  88  stores  and  flats,  and  7  stores,  for  the  period  of  6  years. 
Our  net  return  is  4.2  per  cent.  Of  our  net  return  we  pay  36  per 
cent',  in  taxes ;  that  is  the  average  tax  paid.  On  dwellings  it  runs 
from  31  per  cent,  in  1909,  32  per  cent,  in  1910,  and  in  1911  when 
the  valuations  or  assessments  were  increased  we  paid  60  per 
cent.  It  would  run  in  the  6  years  on  dwellings  from  31  to  40 
per  cent.;  on  flats  it  has  run  from  28  to  39  per  cent;  on  stores 
and  flats  it  has  run  from  29  to  38  per  cent;  and  on  stores  it  has 
decreased,  according  to  our  holdings,  but  that  it  attributed  to 
the  fact  that  we  owned  one  very  large  piece  of  real  estate  that 
the  rental  was  more  than  doubled  after  the  expiration  of  an  old 
time  lease.  But  I  think  it  is  fair  to  say  that  in  the  six  years  the 
increase  in  taxes  of  the  net  has  been  at  least  10  per  cent." 

All  the  real  estate  experts  agree  that  real  property  is  to-day 
paying  all  that  it  can  possibly  afford ;  that  additional  taxes  could 
not  be  shifted  to  the  tenants,  who  are  to-day  paying  all  that  they 
can;  that  an  increase,  therefore  must  come  out  of  the  capital 
value  of  real  estate ;  that  such  an  increase  would  necessarily  wipe 
out  the  equities  of  thousands  of  owners  and  might  precipitate  a 
panic. 

In  so  far  as  mortgages  are  concerned,  it  is  well  to  remember  that 
the  insurance  companies,  savings  banks,  etc.,  whose  investments 
represent  largely  the  savings  of  the  poorer  classes,  are  the  largest 
investors  in  real  estate  mortgages.  The  mortgages  held  by  sav- 


JOINT   LEGISLATIVE   COMMITTEE  ON   TAXATION  19 

ings  banki  aggregate  $1,017,493,000  out  of  a  total  investment 
of  $1,739,000,000,  or  53  per  cent,  and  there  are  no  less  than 
3,450,000  depositors  in  the  savings  banks  of  the  State. 

Mr.  Pulleyn,  representing  the  Savings  Banks  Association,  testi- 
fied as  follows : 

uAny  increase  upon  real  estate  holdings  in  the  city  of  New 
York,  probably  in  the  State  of  New  York,  beyond  the  present 
figures,  would  tend  to  reduce  the  equities  in  the  investment  of 
$1,017,000,000  of  real  estate  loans  that  are  held  at  the  present 
time  by  savings  banks.  We  have  seen  the  indication  in  the  last 
year  in  the  depression  of  real  estate.  We  have  seen  the  hand- 
writing on  the  wall.  We  believe,  those  of  us  who  look  at  the 
real  estate  investment  as  seriously  as  savings  banks  must,  that  this 
increase  of  assessed  valuation  and  increased  rate  is  hurting  us 
very,  very  seriously  —  hurting  our  investment. 

u  Q.  That  is  to  say,  putting  it  plainly,  it  is  reducing  the  margin 
of  equity?  A.  It  is  reducing  the  equity  in  each  one  of  our 
loans,  and  will  continue  to  reduce  the  equity,  because  whilst 
there  is  an  increase  of  a  few  mills  in  taxes,  it  means  quite  a  per- 
centage on  the  face  of  the  loan. 

"  Q.  There  is  a  point  beyond  which  of  course  you  cannot  go  ? 
A.  Yes. 

"  Q.  A  point  beyond  which  your  borrowers  cannot  go,  in  realiz- 
ing the  increase  of  taxation  out  of  rents,  is  there  not?  A. 
Exactly. 

"  Q.  You  feel  that  that  point  is  very  nearly  reached  ?  A.  Since 
there  are  two  ways  we  have  to  look  at  it  One  is  this.  In  the 
reappraisal  of  our  investment  loans  in  real  estate  we  take  as  a 
basis  income.  Our  income  is  reduced.  It  reduces  values  and 
when  values  are  reduced,  we  come  under  the  law  of  the  State 
which  says  savings  banks  shall  not  lend  any  more  than  60  per 
cent,  of  the  price  value. 

"  Q.  Then  you  have  got  to  call  for  a  scaling  down  of  loans  ?  A. 
We  have  got  to  call  for  a  scaling  down  of  loans,  which  we  have 
been  unable  to  do.  We  are  able,  of  course,  to  call,  but  the 
owners  are  unable  to  meet  the  demand." 

From  the  great  volume  of  testimony  presented  to  the  Com- 
mittee with  reference  to  New  York  Citv.  the  following  conclu- 
sions may  be  drawn: 


20  STATE  OF  NEW  YORK 

(1)  That  real  estate  is  paying*  the  bulk  of  the  taxes  and  that 
personal   property,   comparatively   speaking,    is   escaping  almost 
entirely. 

(2)  That  material  increases  have  taken  place  in  the  past  dec- 
ade in  the  city's  bonded  indebtedness,  the  annual  tax  budget  and 
the  tax  rate. 

(3)  That  in  view  of  the  new  "pay-as-you-go"  policy,  adopted 
by    the    present    city    administration,    there    is    likely    to   be    a 
further   material   increase    during   the   next   few   years   in   the 
total  budgets  (due  to  the  increased  appropriations  for  retarding 
and  reducing  the  city's  debt)  and  consequently  material  increase 
in  the  tax  rate. 

(4)  That   from  the   standpoint   of  equity,    real   estate   alone 
should  not  bear  the  full  weight  of  increased  taxes,  and  that  if 
such  a  plan  is  attempted,  serious  consequences  may  ensue. 

(5)  That  so  far  as  New  York  City  is  concerned,  therefore,  it  is 
imperative  that  the  tax  base  be  broadened  so  as  to  include  that 
property  and  those  persons  that  are  not  contributing  to-day  in 
proportion  to  their  ability  to  pay  taxes. 

CHAPTER  III 
THE  TOWNS 

As  already  stated,  the  Committee's  investigation  of  rural  con- 
ditions was  by  no  means  as  thorough  or  as  complete  as  that  of 
the  cities.  We  are  in  a  position  to  say,  however,  that,  generally 
speaking,  in  rural  districts  the  assessed  value  of  real  property 
is  higher  and  nearer  to  true  value  than  it  was  a  few  years  ago; 
that  the  xate  at  which  it  is  taxed  is  higher,  and  that  personal 
property,  in  so  far  as  taxation  is  concerned,  has  almost  ceased  to 
exist.  Nor  is  there  any  likelihood  of  there  being  any  material 
change  in  either  one  of  these  respects. 

Our  conclusion,  then,  as  to  the  entire  State  is,  that  the  tax 
rate  is  altogether  too  high  to  permit  the  successful  taxation  of 
personal  property  at  the  general  property  rate,  and  that  the  future 
financial  needs  of  the  State  and  of  its  subdivisions,  are  such  as 
to  deny  the  hope  that  the  tax  rate  can  be  reduced  to  the  point 
where  such  taxation  becomes  comparatively  successful  or  even 
possible. 


PART  II 
THE  NEW  YORK  SYSTEM  OF  TAXATION 

CHAPTER  I 
PECULIAR  FEATURES  OF  THE  NEW  YORK  TAX  LAW 

The  New  York  tax  system  contain  several  peculiar  features 
that  differentiate  it  in  a  striking  manner  from  nearly  every 
other  tax  system  in  the  United  States.  Several  of  these  peculiari- 
ties are  of  special  interest  because  they  are  unquestionably  account- 
able for  some  of  the  weakest  spots  in  the  present  tax  law. 

(1)  In  the  first  place  the  theory  of  intrastate  situs  of  tangible 
personalty  is  quite  different  in  New  York  from  that  of  most  other 
States,  and  this  difference  results  in  much  unfairness,  not  only 
between  different  classes  of  individuals,  but  also  between  different 
communities  within  the  State.     In  most  states  there  has  been  a 
tendency  more  and  more  to  tax  tangible  personal  property  of 
residents  where  located ;  but  in  New  York  State  all  tangible  as 
well  as  intangible  personalty  is  taxable  only  at  the  legal  domicile 
of  the  owner,  whether  it  be  an  individual  or  a  domestic  corpo- 
ration.    The  extent  to  which  this  peculiarity  is  responsible  for 
tax  evasion  will  be  pointed  out  in  the  following  chapter  dealing 
with  the  faults  of  the  New  York  system. 

(2)  The  second  peculiarity  of  the  New  York  system  is  found 
in  the  debt  exemption  feature.     The  custom  as  to  the  exemption 
of  debts  varies  in  different  states.     In  some  states  the  taxpayer 
is  permitted  to  deduct  only  certain  debts  from  credits;  in  other 
states  all  debts  may  be  deducted  from  credits.     In  most  states 
the  deduction  of  debt  feature  under  the  general  property  tax  is 
troublesome.     In  New  York  State,  however,  the  debt  deduction 
difficulty  is  accentuated  because  of  the  peculiar  privilege  which 
permits  the  total  deduction  of  all  debts  not  simply  from  credits, 
but  from  all  personalty.     In  the  next  chapter  will  be  pointed  out 
how  this  privilege  enables  corporations  to  escape  from  personal 
property  taxation.    The  whole  question  of  debt  deduction,  whether 
limited  to  credits  or  not,  presents  one  of  the  insuperable  difficul- 
ties of  the  present  property  tax. 


22  STATE  OF  NEW  YOEK 

(3)  The  third  peculiarity  is  that  public  service  corporation 
franchises,  or  so-called  "  special  franchises/7  are  treated  as  real 
estate.     This  whole  question  of  special  franchises  is  a  large  one, 
deserving  treatment  at  another  time.     This  feature,  of  course,  is 
not  responsible  for  the  failure  of  the  personal  property  tax. 

(4)  The  fourth  peculiar  feature  is  found  in  the  absence  of  the 
so-called  listing  system.    New  York  is  the  only  state  in  the  Union 
that  has  not  had  a  complete  listing  system.    It  is  true  that  corpo- 
rations are  theoretically  required  by  law  to  render  a  complete 
list  of  all  property  subject  to  taxation,  but  as  a  matter  of  fact  the 
law  is  a  dead  letter.     New  York,  however,  never  has  had,  even 
in  theory,  the  rule  that  individuals  should  list  their  personalty, 
tangible   and    intangible,    for   purposes    of   taxation.      To   this, 
peculiarity  a  few  tax  reformers  with  a  little  knowledge  of  ex- 
perience in  other  states,  have  attributed  the  failure  of  the  personal 
property  tax.     It  can  be  said,  however,  without  fear  of  contra- 
diction that  no  one  acquainted  with  the  results  of  the  listing 
system  in  other  states  has  the  slightest  confidence  in  this  con- 
tention.    The  uniform  experience  of  other  states  has  been  that 
the  listing  system,  even  with  drastic  attempts  at  enforcement  and 
heavy  penalties,  has  failed  absolutely  to  secure  an  enforcement 
of  the  personal  property  tax.    Indeed,  it  might  be  added  that  were 
the  listing  system  successful  in  enforcing  this  unjust  tax,  it  would 
to  that  degree  achieve  a  most  regrettable  success.     It  is  not  be- 
lieved that  this  peculiarity  in  the  New  York  law  is  in  any  consider- 
able way  responsible  for  the  present  inequities. 

(5)  The  next  peculiarity  which  is  of  considerable  importance 
grows  out  of  the  phraseology  of  the  New  York  law.     In  most 
states  the  law  declares  all  property,  read  and  personal,  subject  to 
taxation.     It  then  defines  real  property,  and  defines  personalty 
as  all  property  not  included  in  real  estate.     The  New  York  law, 
after  declaring  all  property,  real  and  personal,  subject  to  taxation, 
proceeded  to  define  personalty,  not  in  the  usual  way,  but  through 
the  method  of  enumerating  the  various  types  of  property  included 
within  the  term.     For  some  reason,  good-will  was  not  included 
in  the  enumeration,  and  the  courts  have  declared  it  to  be  untax- 
able.     As  will  be  explained  in  full  in  the  next  chapter,   this 
peculiarity  has  rendered  it  impossible  to  reach  a  large  part  of  the 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  23 

earning  power  of  some  of  the  wealthiest  corporations   in   the 
State. 

(6)  The  New  York  system  of  taxing  corporations  is  the  most 
complex  of  its  kind  in  the  United  States.     In  the  case  of  certain 
types  of  corporations,  the  aggregate  tax  burden  is  split  up  into 
so  many  different  taxes  levied  at  varying  rates  and  upon  different 
bases,  that  it  has  been  impossible  to  determine  the  relative  burden 
borne  by  various  classes  of  wealth.     In  regard  to  the  taxation  of 
general  business  corporations,  the  law  is  especially  complex  and 
confused.     It  has  been  called  the  most  illogical  corporation  law 
in  America.     It  is  so  ambiguous  that  it  baffles  the  best  tax  at- 
torneys in  the  State,  and  in  many  cases  it  is  utterly  impossible  for 
the  corporation  that  wishes  to  pay  its  full  share  to  know  what  that 
share  is.    It  is  an  interesting  fact  that  under  this  law  many  cor- 
porations, through  their  inability  to  understand  it,  have  actually 
paid  more  taxes  than  they  were  liable  for. 

(7)  The  last  peculiarity  of  the  tax  law  to  be  mentioned  here  is 
section   12,  covering  the  taxation  of  the  personal  property  of 
corporations.     This  feature  is  dealt  with  at  some  length  in  the 
chapter  covering  the  failure  of  the  corporation  personal  property 
tax.     It  is  sufficient  here  to  say  that  there  is  yet  to  be  found  in 
this  State  one  man,  either  among  the  tax  officials  or  the  corpora- 
tions taxed,  to  commend  the  law.    While  it  has  proved  practically 
unenforceable  all  over  the  State,  it  has  been  a  source  of  great 
annoyance  to  corporate  business  in  general. 

CHAPTER  II 
THE  FAULTS  OF  THE  NEW  YORK  SYSTEM  OF  TAXATION 

In  the  previous  chapter  it  was  pointed  out  that  many  of  the 
features  which  differentiate  the  New  York  system  from  those  of 
other  states  constitute  not  only  its  peculiarities,  but  also  its  faults. 
The  faults  of  the  system,  however,  are  not  limited  to  its  peculiari- 
ties. New  York,  like  every  other  state  in  the  Union,  has  suffered 
the  same  inequities  that  arise  from  the  outgrown  general  property 
tax. 

(1)  The  most  conspicuous  defect,  therefore,  of  the  New  York 
system  is  found  in  the  utter  failure  of  that  part  of  the  personal 
property  tax  that  is  still  left  under  the  general  property  system. 


24  STATE  OF  NEW  YOKK 

While  it  must  be  admitted  that  New  York  has  in  part  reformed 
her  personal  property  tax  through  the  substitution  of  her  system 
of  special  taxes,  and  to  this  extent  is  better  off  than  many  of 
her  sister  states,  nevertheless,  it  is  doubtful  whether  in  any  other 
State  in  the  Union  that  part  of  the  personal  property  tax  still 
left  under  a  general  property  scheme  is  a  more  lamentable  failure 
than  in  New  York.  And  this  statement  is  applicable  with  rein- 
forced emphasis  both  to  the  personalty  of  individuals  and  to  the 
personalty  of  corporations.  For  the  details  of  this  failure,  the 
reader  is  referred  to  Part  IV  of  this  report.  It  is  sufficient  here 
to  conclude  with  the  statement  that  all  familiar  with  the  New 
York  system  of  taxation,  however  they  may  disagree  as  to  the 
correct  reform,  are  unanimous  in  the  conclusion  that  the  present 
personal  property  tax  should  be  eradicated  from  our  system  as 
soon  as  possible. 

(2)  The  second  great  fault  in  the  New  York  system  of  tax- 
ation is  to  be  found  in  its  lack  of  adequate  provisions  for  the  ad- 
ministration of  the  tax  law.  As  is  well  known  to  all  those  in- 
formed upon  tax  matters,  the  present  law  was  designed  to  deal 
with  conditions  that  no  longer  exist.  The  framers  of  the  law 
lived  in  a  world  different  from  our  own.  They  designed  a  law 
to  deal  with  a  simple  society  in  which  most  property  was  tan- 
gible and  in  which  ability  to  pay  was  roughly  measured  by  the 
amount  of  tangible  property  owned  by  each.  It  was  designed  for 
business  units  of  local  scope.  Since  that  time  has  come  the 
great  revolution  in  American  industry,  and  with  it  the  great 
state-wide  and  nation-wide  corporation.  Any  system  which 
leaves  in  the  hands  of  the  local  assessor  the  assessment  of  that 
part  of  nation-wide  business  enterprises  that  happens  to  be 
located  in,  or  to  traverse  his  little  district  is,  of  course,  nothing 
short  of  mediaeval.  All  authorities  agree  that  so  long  as  we 
leave  the  assessment  of  the  personalty  of  great  corporations  in 
the  hands  of  the  local  assessor,  we  must  remain  in  the  dark  ages 
of  taxation. 

In  the  matter  of  administration,  New  York  can  make  no  claim 
to  leadership  in  taxation.  For  a  number  of  years,  while  New 
York  was  developing  her  system  of  special  taxes,  this  State  was 
looked  to  for  guidance  in  tax  reform.  That  time  is  past  and 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  25 

many  states  have  progressed  far  beyond  New  York.  Upon  this 
point  there  seems  to  appear  no  difference  of  opinion  among  the 
authorities  on  taxation  either  in  this  or  other  states.  All  agree 
that  the  next  reforms  in  taxation  must  come  in  the  form  of  im- 
proved and  more  centralized  administration.  In  whatever  direc- 
tion reform  in  the  'New  York  system  of  taxation  shall  come,  it 
is  clear  beyond  the  shadow  of  a  doubt  that  to  be  successful  it 
must  be  accompanied  by  improved  administration. 

(3)  The  next  most  striking  fault  of  the  -New  York  system  is 
to  be  found  in  its  peculiar  form  of  intrastate  situs  of  personal 
property.  This  peculiar  feature  has  been  explained  in  the  pre- 
vious chapter.  It  remains  here  to  illustrate  how  subversive  it 
is  of  all  equity  as  between  localities,  and  to  what  extent  tax  eva- 
sion is  possible  under  this  theory. 

Personal  property,  both  tangible  and  intangible,  is  taxable 
under  the  New  York  law  only  at  the  legal  domicile  of  the  owner. 
This  principle  works  with  especial  unfairness  with  regard  to 
business  men  generally,  whether  carrying  on  their  business  as  in- 
dividuals or  as  a  partnership  or  in  corporate  form.  An  individual 
merchant  residing  in  the  town  of  Brighton,  Monroe  county,  may 
own  and  operate  a  large  store  in  the  city  of  Rochester.  Or  that 
same  mercantile  business  may  be  incorporated  and  the  corporation 
may  select  the  town  of  Esopus  as  its  principal  place  of  business, 
though  the  latter  town  has  no  connection  whatever  with  the  busi- 
ness. In  either  one  of  the  instances  mentioned,  it  would  be  im- 
possible under  the  law  for  the  city  of  Kochester  to  tax  either  the 
individual  merchant  or  the  corporation  on  the  large  stock  of  goods 
carried  by  the  store  in  the  city  of  Rochester,  while  it  is  highly 
improbable  that  any  considerable  tax  would  be  paid  either  to  the 
town  of  Brighton  or  to  the  town  of  Esopus.  In  other  words,  the 
locality  that  supplies  lire  and  police  protection,  as  well  as  other 
advantages,  is  required  to  yield  the  right  to  tax  the  property  so 
protected  to  other  localities  supplying  none  of  these  protections, 
while  the  individual  merchant  or  the  corporation  doing  business 
and  actually  residing  in  the  city  of  Rochester,  to  continue  our 
illustration,  is  obliged  to  meet,  in  so  far  as  local  trade  is  con- 
cerned, the  competition  of  a  rival  who  is  free  from  all  the  taxa- 
tion on  personal  property. 


26  STATE  OF  NEW  YORK 

This  peculiarity  of  the  New  York  law  is  such  a  prolific  source 
of  tax  evasion  that  considerable  attention  will  be  given  to  it  in 
those  sections  of  this  report  dealing  with  the  failure  of  section  12. 

(4)  The  next  important  fault  of  the  New  York  system  is 
found  in  the  needless  complexity  and  ambiguity  of  the  method  of 
taxing  corporations  both  for  State  purposes  and  for  local  pur- 
poses.    As  this  phase  has  been  briefly  touched  upon  in  the  pre- 
vious chapter,  and  as  it  will  be  elaborated  to  some  extent  in  a 
special  section  of  this  report,  we  shall  only  mention  here  that  it 
comprises  a  very  acute  fault  which  demands  immediate  and  radi- 
cal reform. 

(5)  The  last  important  fault  to  be  dwelt  upon  in  this  chapter, 
because  of  its  far-reaching  consequences,  deserves  special  atten- 
tion.    It  may  be  summed  up  in  one  statement  that  not  only  do 
large  groups  of  wealth  escape  taxation  entirely,  but  many  in- 
dividuals most  able  to  pay  taxes  and  enjoying  great  privileges 
within  the  State  cannot  be  reached  under  the  present  law.     The 
effect  of  this  evasion  has  both  important  direct  and  indirect 
results.     The  direct  effect  is  that  in  escaping  their  fair  share, 
these  sources  transfer  their  share  of  the  burden  to  those  already 
heavily  taxed.     The  indirect  effect,  which  is  perhaps  of  greatest 
importance,  is  that  the  knowledge  of  this  wide-spread  evasion  sows 
discontent  and  in  many  cases  dishonesty  in  the  minds  of  those 
who  would  otherwise  be  willing  to  pay  their  full  share.     From 
the  results  of  a  wide  investigation,  it  appears  beyond  doubt  that 
the  average  person,  both  individual  and  corporation,  would  be  will- 
ing to  pay  his  fair  share  of  taxes,  were  the  burdens  more  equitably 
and  evenly  distributed. 

CHAPTER  III 

WHY  THE  PRESENT  SYSTEM  CANNOT  BE  RELIED  UPON  FOR  ADDI- 
TIONAL NEEDED  REVENUE 

To  anyone  familiar  with  the  working  of  the  general  property 
tax  in  New  York  State,  it  is  inconceivable  that  the  communities 
of  the  State  should  continue  to  raise  additional  revenue  by 
increasing  year  after  year  the  rate  of  the  direct  tax.  There  are  not 
less  than  four  important  reasons  why  it  would  be  inequitable 
as  well  as  unwise  from  the  point  of  view  of  the  stability  of  certain 
lines  of  business  to  place  additional  burdens  upon  that  property 
bearing  the  general  property  rate. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  27 

(1)  In  the  first  place,  a  horizontal  raise  always  accentuates 
existing  inequalities.     The  existing  inequalities  of  the  present 
system  are  altogether  too  great  to  permit  any  degree  of  accentua- 
tion.   This  fact  would  be  true  were  the  horizontal  raise  applied  to 
all  taxes,  but  under  our  system,  the  situation  is  even  worse  because 
a  horizontal  raise  is  always  limited  to  only  part  of  the  taxable  base. 
Under  our  system  of  special  taxes,  a  large  number  of  sources  have 
been  taken  out  from  under  the  general  property  tax.     Included  in 
this  part  of  the  tax  base  are  banks,  trust  companies,  insurance 
companies,  savings  banks,  mortgages,  etc.     The  rates  upon  them 
are  fixed  and  remain  the  same  every  year  regardless  of  the  rise  in 

•  the  cost  of  government.  This  system  throws  upon  the  remaining 
sources,  viz.,  real  estate  and  that  small  part  of  personalty  that  is 
actually  reached,  a  burden  which  in  many  cases  is  already  too 
heavy  to  bear. 

Much  can  be  said  in  favor  of  our  special  taxes  and  in  no  place 
does  this  report  suggest  the  return  to  a  general  property  system. 
It  must  be  admitted,  however,  that  when  the  bank  and  trust  com- 
panies—  those  forms  of  wealth  which  according  to  the  returns 
of  the  internal  revenue  department  yield  the  largest  profits  of 
any  American  business  —  when  these  are  unaffected  by  the 
increased  cost  of  government,  it  is  unfair  to  continue  to  heap 
burdens  upon  that  wealth  coming  under  the  general  property 
rate.  Of  course  all  lines  of  business  in  so  far  as  they  own  real 
estate  are  reached  by  the  general, property  rate.  However,  many 
of  those  branches  which  are  most  able  to  pay  have  a  small  propor- 
tion of  their  capital  invested  in  real  estate.  The  large  element 
of  intangible  personalty  which  represents  such  an  important  part 
of  the  earnings  of  American  business  is  not  reached  by  an  in- 
creased tax  rate  under  our  present  system. 

(2)  The  second  reason  why  the  present  system  should  not  be 
relied  upon  for  additional  revenue  is,  that  great  masses  of  wealth 
are  now  escaping,  in  part  or  in  whole,  from  paying  their  fair 
share  of  taxation;  and  furthermore,  that  these  sources  cannot  be 
reached  under  the  present  system.     And  in  this  connection  it 
should  be  noted  and  emphasized  that  the  present  high  rates  of  the 
general  property  tax  are  due  principally  not  to  the  unusually 
great  expenditures  of  money  in  the  State  of  New  York  nor  to 


28  STATE  OF  NEW  YORK 

great  extravagance,  but  to  the  fact  that  so  much  wealth  is  totally- 
escaping  from  taxation.  In  other  words,  the  part  which  escapes 
has  loaded  its  burden  upon  the  part  that  is  caught.  Were  the 
people  of  New  York  once  aroused  to  the  full  extent  of  evasions 
under  the  present  law,  another  year  could  not  pass  without  an 
important  tax  reform. 

What  are  the  principal  sources  that  are  now  escaping?  We 
have  already  mentioned  intangible  personalty.  Under  this  term 
is  grouped  the  greatest  earning  power,  and  therefore,  the  greatest 
ability  to  pay  taxes  in  America.  And  yet  under  our  present  law 
it  is  impossible  to  reach  an  important  part  of  this  wealth.  It  is  a 
well-known  fact  that  the  more  complex  our  business  world  grows, 
the  larger  the  amount  of  income  that  is  not  directly  derived  from 
real  property.  Our  present  law  is  based  upon  the  theory  that 
earning  power  is  fairly  represented  by  property  and  especially 
real  property.  However,  a  superficial  knowledge  of  business  of 
today  discloses  the  fact  that  quite  the  contrary  is  true.  As  a 
result  of  this  inconsistency  between  the  law  and  the  fact,  we  have 
permitted  an  important  part  of  our  well-to-do  citizens  to  grow  up 
and  enjoy  large  incomes,  and  therefore  large  tax-paying  ability, 
without  actually  requiring  them  to  bear  their  share  of  the  burden. 

Another  fruitful  source  of  tax  evasion  is  found  among  those 
wealthy  citizens  of  New  York  who  shift  their  legal  residence  for 
the  purpose  of  evading  taxes.  While  they  may  not  be  reached 
under  our  present  law,  they  represent  a  large  taxpaying  ability 
which  ought  to  be  reached  and  which  could  be  reached  under 
other  forms  of  taxation  suggested  in  the  latter  part  of  this  report. 

A  still  more  important  source  that  escapes  almost  all  taxation 
is  that  of  foreign  corporations  doing  large  amounts  of  business 
in  the  State  of  New  York.  It  is  argued  by  some  that  foreign  cor- 
porations ought  not  to  be  taxed  to  any  extent  in  this  State.  How- 
ever, a  careful  study  discloses  the  fact  that  most  of  these  corpo- 
rations are  foreign  only  in  name,  and  that  in  reality  they  are 
domestic  corporations  with  many  of  their  plants  located  in  the 
State.  In  fact,  many  of  these  foreign  corporations  now  own  and 
control  property  located  in  this  State  which  formerly  was  owned 
and  controlled  by  domestic  corporations.  In  other  words,  large 
groups  of  wealth  legally  and  fairly  subject  to  taxation  in  the 


JOINT  LEGISLATIVE  COMMITTEE  ox  TAXATION  29 

State  of  New  York  have  been  by  virtue  of  a  legal  fiction  trans- 
ferred to  another  jurisdiction.  This  is  a  subject  of  greater 
importance  for  New  York  State  than  for  any  other  State  in  the 
Union. 

In  addition  to  the  above,  there  are  several  other  groups  of 
wealth  that  are  escaping  from  paying  their  fair  share.  Space  does 
not  permit  the  discussion  of  these  in  detail.  In  summarizing, 
however,  it  is  sufficient  to  say  that  were  proper  and  thoroughly 
possible  means  taken  for  reaching  the  sources  which  now  escape, 
it  would  not  be  necessary  to  consider  the  doubtful  results  of 
increasing  present  rates.  Present  rates  would  not  be  increased; 
they  would  be  decreased  materially. 

(3)  The  final  reason  why  we  cannot  rely  upon  the  general 
property  tax  for  additional  revenue  lies  in  the  fact  that  any  con- 
siderable increase  would  threaten  to  disturb  important  business 
conditions.  In  this  connection  the  real  estate  situation  in  New 
York  City  and  other  localities  is  already  such  as  to  cause  appre- 
hension. This  statement  should  not  be  misunderstood.  Much 
confusion  has  been  injected  into  the  discussion  by  the  exaggerated 
claims  of  the  real  estate  men,  on  the  one  hand,  and  of  a  group  of 
radical  social  reformers,  on  the  other.  It  should  be  noted  that 
nothing  but  confusion  can  result  from  talking  of  real  estate  in  the 
aggregate.  In  some  localities  certain  sections  of  the  real  estate 
field  are  in  a  very  prosperous  condition  and  any  reasonable  in- 
crease in  the  tax  rate  would  be  taken  care  of  by  the  normal 
increase  in  the  value  of  property.  In  such  cases  comprising 
possibly  one-third  of  the  entire  State,  it  is  foolish  to  speak  of  the 
unbearable  burden  of  the  general  property  tax.  This  condition 
represents  important  parts  of  the  city  of  New  York. 

On  the  other  hand,  there  are  large  sections  of  the  city  of  New 
York,  as  well  as  parts  of  the  State  at  large,  where  an  increase  in 
the  tax  rate  might  constitute  nothing  short  of  confiscation. 
Indeed,  the  present  high  rates  upon  real  estate  have  already, 
through  the  reduction  of  net  income,  actually  destroyed  capital 
value.  In  proof  of  this  fact  we  have  abundant  evidence.  In  a 
large  number  of  cases  the  value  of  the  real  estate  has  not  increased 
as  the  tax  rates  increased.  Indeed,  in  many  cases  while  the  tax 
rates  have  increased,  the  actual  value  of  the  property  has 


30  STATE  OF  NEW  YORK 

decreased.  And,  moreover,  this  has  taken  place  during  a  period 
when  the  tax  officers  have  been  pushing  the  assessed  value  nearer 
and  nearer  to  the  market  value.  They  have,  in  fact,  actually 
pushed  the  assessed  value  beyond  the  market  value  in  some  cases. 
The  cases  presented  as  sworn  testimony  at  the  New  York  City 
hearings  of  the  Joint  Legislative  Committee  serve  to  illustrate 
how  inequitably  the  present  general  property  rate  bears  upon 
real  estate. 

And  it  should  be  carefully  noted  here  what  great  varieties  of 
tax-paying  ability  are  grouped  under  the  term  "  real  estate 
owners."  Our  single-tax  friends  are  fond  of  talking  of  certain 
well-known  wealthy  New  York  families  and  give  the  impression 
that  most  of  New  York  real  estate  is  monopolized  by  the  few  rich 
holders.  It  is  greatly  to  be  regretted  that  they  have  created  a 
false  impression  by  centering  public  attention,  not  upon  the  nor- 
mal condition,  but  upon  the  unusual  and  abnormal. 

A  careful  examination  of  the  real  estate  situation,  not  only  in 
the  State  at  large,  but  in  New  York  City  itself,  will  disclose  a 
surprising  number  of  small  holders  of  real  estate,  who  depend 
upon  the  income  from  this  property  for  living.  In  many  in- 
stances the  head  of  the  family  before  dying  has  invested  his 
earnings  in  real  estate  in  the  hope  that  either  the  increased  value 
or  the  increased  earning  of  the  property  would  be  sufficient  to 
take  care  of  his  wife  and  partly  educate  his  children.  Cases  are 
now  frequent  in  which  those  who  owned  the  property  pay  out  a 
large  part  or  nearly  all  of  the  income  in  taxes.  The  situation  of 
the  small  salaried  man  who  desires  to  own  his  own  home  is  even 
more  serious,  in  fact  the  high  rates  constitute  a  positive  deter- 
rent to  home  building.  In  summarizing,  therefore,  it  should  be 
clearly  borne  in  mind  that  the  injustice  of  the  present  system 
lies  not  in  the  fact  that  it  bears  heavily  on  all  real  estate  owners, 
but  rather  in  the  fact  that  it  fails  to  discriminate  and  sometimes 
bears  with  such  crushing  force  upon  those  who  are  least  able 
*°  pay. 


PART    III 
THE  FAILURE  OF  THE  PERSONAL  PROPERTY  TAX 

CHAPTER  I 
HISTORY  OF  TAX  IN  EUROPE 

We  would  like,  did  space  permit,  to  trace  the  history  of  the 
personal  property  tax  from  mediaeval  times  down  to  the  present 
day;  to  show  how  it  was  once  in  use  in  practically  every  country 
in  Europe ;  how,  as  the  earlier  and  simple  economic  structure  gave 
way  to  modern  complex  development,  its  weakness  and  defects 
became  apparent,  so  that  one  by  one  these  countries  abandoned  it 
until  to-day  Switzerland  is  the  only  country  in  Europe  where  the 
general  property  tax  still  remains.  \Ve  cannot  do  better  in  this 
connection  than  to  quote  briefly  from  Seligman's  Essays  on  Taxa- 
tion, page  61 : 

"  Historically,  the  property  tax  was  once  well-nigh  universal. 
Far  from  being  an  original  idea  which  the  Americans  instinctively 
adopted,  it  is  found  in  all  early  societies  whose  economic  condi- 
tions were  similar  to  those  of  the  American  colonies.  It  was 
the  first  crude  attempt  to  attain  a  semblance  of  equity,  and  it  at 
first  responded  roughly  to  the  demands  of  democratic  justice. 
In  a  community  mainly  agricultural,  the  property  tax  was  not 
unsuited  to  the  social  conditions.  But  as  soon  as  commercial  and 
industrial  considerations  came  to  the  foreground  in  national  or 
municipal  life,  the  property  tax  decayed,  became  a  shadow  of  its 
former  self  and,  while  professing  to  be  a  tax  on  all  property,  ulti- 
mately turned  into  a  tax  on  real  property.  The  disparity  be- 
tween facts  and  appearances,  between  practice  and  theory,  almost 
everywhere  became  so  evident  and  engendered  such  misery,  that 
the  property  tax  was  gradually  relegated  to  a  subordinate  position 
in  the  fiscal  system,  and  was  at  last  completely  abolished.  All 
attempts  to  stem  the  current  and  to  prolong  the  tax  by  a  more 
stringent  administration  had  no  effect  but  that  of  injurious  reac- 
tion on  the  morale  of  the  community.  America  is  to-day  the 
only  great  nation  deaf  to  the  warnings  of  history.  But  it  is  fast 
near  ing  the  stage  where  it,  too,  will  have  to  submit  to  the 
inevitable." 


32  STATE  OF  NEW  YORK 

FAILURE  IN  THE  UNITED  STATES 

The  personal  property  tax  has  had  a  fair  trial  in  nearly  every 
State  in  the  Union,  and  has  everywhere  proved  a  failure.  This 
is  the  practically  unanimous  verdict  of  the  many  able  commis- 
sions that  have  made  a  careful  study  of  the  tax  in  the  various 
states.  To  quote  from  all  of  these  reports,  however  impressive 
the  evidence  would  be,  would  be  merely  cumulative.  We  give 
therefore,  but  brief  extracts  from  five  of  the  most  important, 
which  may  fairly  be  said  to  be  typical  and  representative. 

REPORT   OF   THE    COMMISSION   ON   TAXATION,   MASSACHUSETTS, 
1908,  Pages  22-24,  25,  26-28,  33-34 

"  This  method  of  taxation  is  frequently  described  as  peculiarly 
American  and  democratic,  and  it  is  supposed  to  be  a  method 
which,  if  fully  carried  out,  would  oblige  every  man  to  contribute 
to  the  support  of  public  charges  in  proportion  to  his  ability  to  pay. 
But,  as  a  matter  of  fact,  the  system  is  neither  distinctively  Ameri- 
can nor  democratic,  and  it  is  admitted  that,  however  excellent 
the  intent  of  the  law,  the  practical  result  has  never  been  that 
all  citizens  do  contribute  in  proportion  to  their  ability  to  bear 
the  charges  of  government. 

"  The  general  property  tax  was  once  in  nearly  universal  use 
in  Europe,  and  was  brought  to  Massachusetts  by  the  early  settlers, 
who  merely  introduced  here  a  system  with  which  they  had  been 
familiar  in  the  country  from  which  they  came.  In  England,  as 
in  most  other  countries  of  Europe,  the  principal  form  of  direct 
taxation  had  long  been  a  general  levy  upon  property.  In  the 
seventeenth  century  this  tax  was  known  as  the  subsidy,  and  in 
practical  operation  produced  the  same  results  as  followed  its  in- 
troduction in  the  2sTew  World.  Personal  property  always  man- 
aged to  escape  taxation  in  whole  or  in  part,  so  that  complaints 
about  the  inequality  and  injustice  of  the  system  were  almost  as 
common  as  they  are  in  Massachusetts  in  our  own  time.  In  1592 
one  writer  stated  that  not  more  than  five  men  in  London  were 
assessed  upon  goods  exceeding  £200,  and  in  1601  Sir  Walter 
Ealeigh  complained  that  l  The  poor  man  pays  as  much  as  the 
rich/  About  the  middle  of  the  seventeenth  century  the  subsidy 
became  so  unsatisfactory  that  it  was  replaced  by  a  new  tax, 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  33 

known  as  the  monthly  assessment,  which  was,  however,  but  the 
same  thing  under  another  name.  The  immediate  result  of  the 
change  was  a  somewhat  more  complete  assessment  of  property; 
but  before  long  personalty  began  to  evade  taxation  as  before;  so 
that  in  1692  the  monthly  assessment  was  abolished,  and  re- 
placed by  a  new  tax  designed  to  reach  the  true  yearly  value  of 
all  lands,  tenements,  offices  and  personal  estates.  This  new  tax 
was  but  another  property  tax  in  a  somewhat  different  form,  and 
it  soon  fared  as  badly  as  its  predecessors.  During  the  eighteenth 
century  personal  property  disappeared  from  the  assessment  rolls 
as  rapidly  as  ever  before,  so  that  by  1798  over  nine-tenths  of  the 
levy  fell  upon  real  estate,  and  less  than  one-tenth  upon  offices  and 
personal  estate.  By  this  time,  in  fact,  the  tax  had  generally 
come  to.be  known  as  the  '  land  tax.'  In  some  towns,  we  are  told, 
the  whole  tax  was  assessed  upon  land  and  houses  and  personal 
estates  wholly  escaped. 

"  In  1798  an  act  was  passed  by  which  the  land  tax  became 
virtually  a  fixed  charge  upon  the  land,  and  since  that  time  no 
further  attempt  has  been  made  in  England  to  levy  a  general 
property  tax.  The  national  revenues  are  now  derived  from  an 
income  tax,  taxes  on  inheritances  and  the  usual  indirect  taxes; 
while  local  revenues  are  drawn  chiefly  from  a  tax  levied  upon 
occupiers  of  land,  houses  and  trade  premises. 

"And  in  most  of  the  other  countries  of  Europe  the  result  has 
been  the  same.  *  *  * 

"  It  is  equally  erroneous  to  call  the  general  property  tax  a  dem- 
ocratic form  of  taxation.  It  is  not  found  in  such  ultra-demo- 
cratic communities  as  the  Australasian  States;  nor,  with  the  ex- 
ception of  Switzerland,  is  it  found  in  those  countries  of  Europe 
in  which  democratic  ideas  have  taken  deepest  root.  It  was 
brought  to  America  from  England  in  the  seventeenth  century, 
when  democracy  existed  neither  in  the  mother  country  nor  the 
colonies,  and  has  been  fastened  upon  us  rather  by  historical  acci- 
dent than  because  of  its  inherently  democratic  qualities.  *  * 

'  The  history  of  the  general  property  tax  in  Massachusetts  is 

not  materially  different  from  its  history  in  other  States.     From 

1651  to  the  present  date  complaints  that  personal  property  evades 

taxation  are  met  at  every  hand.     During  the  last  thirty-five  years 

2 


• 
34  STATE  OF  NEW  YORK 

four  commissions  or  special  committees,  exclusive  of  the  present, 
have  heen  appointed  to  study  the  question ;  and  their  reports  dis- 
close the  fact  that  the  taxation  of  intangible  property  is  the 
weakest  point  in  the  entire  system.  There  is  reason  to  believe  that 
the  administration  of  the  law  by  Massachusetts  assessors  has 
been  considerably  better  than  the  administration  of  the  laws  of 
many  other  States.  The  taxation  of  intangible  property  has  not 
been  such  a  complete  farce  with  us  as  it  has  been  elsewhere ;  yet 
we  find  no  one  who  supposes  that  we  are  now  taxing  more  than 
10  or  20  per  cent,  of  the  money,  credits  and  securities  taxable 
under  our  present  law.  After  careful  study  of  the  subject,  our 
commission  is  forced  to  the  same  conclusion  that  was  reached  by 
the  commission  of  1897,  which  we  reproduce  here: 

"  e  It  is  obvious,  however,  that  this  method  of  taxation  en- 
counters, as  to  intangible  property,  exceptional  and  indeed  al- 
most insuperable  difficulties.  There  are  no  such  external  indi- 
cations of  taxable  liability  as  appear  in  the  case  of  live  stock, 
vessels,  stock  in  trade  or  machinery.  General  repute  as  to  the 
possession  of  large  means,  or  a  mode  of  life  indicating  an  ample 
income,  do  not  necessarily  signify  any  thing  as  to  taxable  securi- 
ties. The  investments  of  a  person  of  means  may  be  in  real  es- 
tate within  or  without  the  State,  or  in  Massachusetts  stocks  or 
mortgages,  or  in  bonds  of  the  United  States.  An  ample  income, 
indicated  by  general  expenditure,  may  be  derived  either  from 
such  sources  already  taxed  or  not  taxable,  or  from  trade  and  pro- 
fession, or  from  taxable  securities, —  these  last  two  being  taxable, 
but  'taxable  at  very  different  rates.  The  assessors  hence  must 
rely  on  their  knowledge  and  judgment  in  estimating  the  taxable 
property  of  this  form.  In  a  great  and  complicated  society,  with 
a  mass  of  investments  ramifying  in  all  directions  the  assessors 
are  here  confronted  with  a  task  which  the  best  of  them  could  not 
execute  satisfactorily.  Even  the  most  capable,  most  experienced 
and  most  conscientious  assessors  could  not  have  sufficient  knowl- 
edge and  judgment.  But  only  average  capacity  can  be  expected; 
experience  is  often  lacking;  and,  even  for  conscientious  assessors, 
the  temptations  to  laxity  are  in  many  cases  irresistible.  Conse- 
quently, the  taxation  of  this  form  of  property  is  in  high  degree 
uncertain,  irregular  and  unsatisfactory.  It  rests  mainly  on  guess- 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  35 

work;  it  is  blind,  and  therefore  unequal.  Here  is  its  greatest 
evil,  though  not  its  only  evil.  It  is  haphazard  in  its  practical 
working,  and  hence  demoralizing  alike  to  taxpayers  and  to  tax 
officials.'  " 

KEPORT  OF  MARYLAND  COMMISSION,  1888,  PAGES  101,  103,  151 

"  The  truth  is,  the  existing  system  is  so  radically  had,  that 
the  more  you  improve  it  the  worse  it  becomes.  This  lies  in  the 
nature  of  things  and  nothing  any  Legislature  can  do  can  alter 
this  condition  of  things.  Experience  and  reason  alike  teach  this, 
and  in  my  opinion  place  it  beyond  controversy  for  all  those  who 
have  eyes  to  see  what  it  passing  about  them  every  day  of  their 
lives." 

(  The  reason  why  our  present  system  of  taxation  does  not 
operate  satisfactorily  can  be  stated  in  a  word;  although  it  is  on 
the  face  of  it  fair  and  simple,  it  is  found  in  practice  to  be  an 
impracticable  theory,  for  a  large  portion  of  property  escapes  tax- 
ation, and  that  the  property  of  those  best  able  to  bear  the  burdens 
of  government,  namely,  the  wealthy  residents  of  cities.  On  the 
one  hand,  it  is  impossible  to  find  this  property,  and  to  force  men 
to  make  returns  under  oath,  results  invariably  in  perjury 
and  demoralization,  without  discovery  of  property;  on  the  other 
hand,  federal  laws  over  which  our  States  and  municipalities  have 
no  control,  enable  many  to  escape  taxation  by  investments,  often 
temporary,  in  federal  bonds,  exempt  from  taxation. 

"  Personal  property  is  sometimes  discovered  in  its  entirety, 
but  it  is  then  nearly  always  the  property  of  the  comparatively 
helpless,  namely,  widows  and  orphans,  whose  possessions  are  a 
matter  of  public  record.  Less  often  a  burden  is  imposed  upon 
the  conscientious.  Thus,  I  happen  to  know  of  one  wealthy  town 
>f  a  few  thousand  inhabitants,  where  three  men  of  conscientious 
sonvictions  with  regard  to  a  man's  duty  to  the  commonwealth, 
pay  taxes  on  their  personalty,  although  they  have  as  good  an  op- 
portunity to  escape  as  others.  This  state  of  things  naturally 
produces  dissatisfaction  on  the  part  of  farmers  and  other  hard 
working  people,  who  feel  that  personalty  ought  to  bear  a  share 
of  the  burden  of  taxation.  On  this  account  they  suggest  various 
:hings,  like  taxation  of  mortgages,  and  a  more  vigorous  search 


36  STATE  OF  NEW  YORK 

for  hidden  property.  Their  aim,  as  I  have  said,  is  commendable, 
but  to  attempt  to  reach  the  desired  goal  by  direct  means,  under 
existing  laws,  or  any  laws  which  do  not  imply  a  change  of  the 
system  of  taxation,  is  as  Utopian  as  the  dream  of  the  most  radi- 
cal socialist.  If  we  desire  to  accomplish  a  purpose  we  must  use 
means  adequate  to  the  end  in  view.  * 

"  Another  aspect  of  this  case  is  presented  by  the  facts  of  com- 
petition in  business.  Those  who  escape  the  payment  of  a  fair 
share  of  business  taxes  have  an  advantage  in  business  which  en- 
ables them  to  undersell  their  competitors,  and  when  a  business  man 
sees  ruin  staring  him  in  the  face  because  his  dishonest  neighbor 
makes  false  returns  and  pays  taxes  on  only  a  fractional  part  of  his 
property,  the  temptation  to  do  likewise  is  almost  irresistible, 
except  for  moral  heroes,  and  moral  heroism  cannot  be  made  the 
basis  of  governmental  action." 

KEPORT  OF  KENTUCKY  SPECIAL  COMMISSION,  1912,  PAGES  83-84 

"  In  1904  the  total  roll  was  $630,795,464,  and  monies,  credits 
and  securities  were  assessed  at  $68,829,446,  or  10.9  per  cent. 

"  In  1911  the  total  roll  was  $846,450,020,  and  monies,  credits 
and  securities  were  assessed  at  $83,468,030,  or  9.8  per  cent. 

"  In  1906  the  ratio  was  10.8  per  cent. 

"  In  1907  the  ratio  was  11.5  per  cent. 

"  In  1908  the  ratio  was  10.1  per  cent. 

"  In  1910  the  ratio  was  9.5  per  cent. 

"  As  we  said  in  our  preliminary  report :  The  State  of  Kentucky 
received  more  revenue  for  the  year  1912  from  its  dogs  than  it 
did  from  all  the  bonds,  monies  and  stocks  in  the  State." 

"  When  finally  we  note  that  money,  credits  and  securities  taxed 
in  1910,  the  year  of  the  census,  were  $79,000,000  or  only  $34 
per  capita,  the  necessity  for  further  research  seems  to  disappear. 

"  Nobody  can  seriously  maintain  that  all  monies,  credits  and 
securities  are  taxed  or  any  substantial  part. 

"  In  the  opinion  of  the  Commission,  the  present  methods  of 
taxing  money  and  credits  are  ineffective  in  producing  revenue 
and  highly  unjust  in  their  operation  on  individual  taxpayers. 
They  constitute  one  of  the  gravest  problems  connected  with  our 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  37 

system  of  taxation,  and  until  they  are  changed  our  tax  laws  will 
remain  vitally  and  fundamentally  defective." 

REPORT  OF  VIRGINIA  TAX  COMMISSION,  1911,  PAGES  69-70 
'  To  summarize,  it  has  appeared  that  inequalities  and  under- 
valuations of  every  sort  appear  in  our  taxation  of  personal 
property.  How  extensive  these  are  can  only  be  surmised;  how 
iniquitous  they  are  can  merely  be  imagined.  Viewing  the  situ- 
ation as  a  whole,  the  writer  believes  that  it  would  be  better  to 
remove  the  tax  on  personal  property  altogether  and  seek  other 
sources  of  revenue,  than  to  perpetuate  the  frauds,  inequalities 
and  undervaluations  which  now  encumber  the  administration  of 
our  tax  laws. 

"A  law  which  permits  these  things  is  unquestionably  a  failure, 
and  it  behooves  those  interested  in  the  problem  to  ascertain  why 
and  wherein  the  law  has  broken  down.  Examination  has  shown 
that  the  failure  of  the  property  tax  in  Virginia  may  be  traced  to 
four  things.  These  are,  first,  the  attempted  enforcement  of  a 
law  under  industrial  conditions  which  render  it  inoperative  of 
necessity  and  invalidate  the  theory  upon  which  it  is  based; 
second,  the  failure  of  many  commissioners  of  the  revenue  to  en- 
force the  existing  laws;  third,  certain  defects  in  the  law  which 
make  deceit  and  injustice  easy;  fourth,  the  growth  of  a  feeling 
among  our  people  that  there  is  nothing  dishonorable  or  discredit- 
able in  (  dodging  taxes.' ' 

REPORT  or  NATIONAL  TAX  ASSOCIATION,  VOL.  IV,  PAGES  309^- 

310 
"  To  sum  up,  your  Committee  finds : 

'  That  the  general  property  tax  system  has  broken  down ; 

'  That  it  has  not  been  more  successful  under  strict  administra- 
tion than  where  the  administration  is  lax; 

1  That  in  the  States  where  its  administration  has  been  the  most 
stringent,  the  tendency  of  public  opinion  and  legislation  is  not 
towards  still  more  stringent  administration,  but  towards  a  mod- 
ification of  the  system; 

(  That  the  same  tendency  is  evident  in  the  States  where  the 
administration  has  been  more  lax ; 


38  STATE  OF  NEW  YORK 

"  That  the  States  which  have  modified  or  abandoned  the  gen- 
eral property  tax  show  no  intention  of  returning  to  it ; 

"  That  in  the  States  where  the  general  property  tax  is  required 
by  constitutional  provisions,  there  is  a  growing  demand  for  the 
repeal  of  such  provisions. 

"  We  conclude,  therefore,  that  the  failure  of  the  general  prop- 
erty tax  is  due  to  the  inherent  defects  of  the  theory ; 

"  That  even  measurably  fair  and  effective  administration  is 
unattainable;  and  that  all  attempts  to  strengthen  such  adminis- 
tration serve  simply  to  accentuate  and  to  prolong  the  inequalities 
and  unjust  operation  of  the  system." 

SUMMARY  OF  REPORTS  OF  NEW  YORK  COMMISSIONS 

The  New  York  authorities  are  all  to  the  same  effect. 

"A  more  unequal,  unjust,  and  partial  system  for  taxation  could 
not  well  be  devised.'7  (First  Annual  Report  of  the  State  As- 
sessors, 1860,  p.  12.) 

"  The  defects  of  our  system  are  too  glaring  and  operate  too 
oppressively  to  be  longer  tolerated."  (Comptroller's  Report, 
1859.) 

"  The  burdens  are  so  heavy  and  inequalities  so  gross  as  almost 
to  paralyze  and  dishearten  the  people."  (Assessor's  Report,  1873, 
p.  3.) 

"  The  absolute  inefficiency  of  the  old  rickety  statutes  passed  in 
a  bygone  generation  is  patent  to  all."  (Assessors'  Report,  1877, 
p.  5.) 

"  The  hope  of  obtaining  satisfactory  results  from  the  present 
broken,  shattered,  leaky  laws,  in  vain."  (Report  Association  of 
Taxes  and  Assessments,  1876,  p.  52.) 

"  The  system  is  a  farce,  sham,  humbug."  (Assessors'  Report 
of  1879,  p.  23.) 

'  The  present  result  is  a  travesty  upon  our  taxing  system,  which 
aims  to  be  equal  and  just."  (Comptroller's  Report,  1889,  p.  34.) 

The  general  property  tax  is  a  reproach  to  the  State,  an  out- 
rage upon  the  people,  a  disgrace  to  the  civilization  of  the  Nine- 
teenth Century,  and  worthy  only  of  an  age  of  mental  and  moral 
darkness  and  degradation  when  "  the  only  equal  rights  were  those 
of  the  equal  robber."  (Comptroller's  Report,  1889,  p.  34.) 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  39 

The  above  quotations  from  the  ^ew  York  reports  are  taken  from 
Seligman's  Essays  in  Taxation. 

REPORT  OF  1872 

The  report  of  the  Commission  of  1872,  of  which  Mr.  David  A. 
WTe!ls  was  chairman,  was  one  of  the  ablest  tax  reports  ever  writ- 
ten. We,  therefore,  quote  from  it  at  some  length : 

"  In  the  case  of  New  York,  no  one,  either  officials  or  citizens, 
is  satisfied  with  the  existing  system  or  its  administration ;  and  so 
apparent,  moreover,  are  its  defects,  that  the  necessity  of  reform 
is  almost  universally  acknowledged.  But  the  Commissioners, 
who  have  made  the  system  a  matter  of  special  study  and  inquiry, 
go  further,  and  unqualifiedly  assert  that,  as  it  exists  to-day  it  is 
more  imperfect  in  theory  and  defective  in  administration  than 
almost  any  system  that  has  ever  existed,  and  that  its  longer  recog- 
nition and  continuance  is  alike  prejudicial  to  the  material  interest 
of  the  State  and  the  morality  of  its  people." 

Real  property  being  visible  and  tangible,  presents  no  inherent 
difficulty  in  the  way  of  assessment,  and  the  system  might  be  rea- 
sonably supposed  to  work  with  some  degree  of  uniformity  and 
equality,  yet  they  found  it  impossible  to  find  any  two  contiguous 
towns,  cities  or  counties  in  which  the  valuation  of  real  estate 
approximates  in  any  degree  to  uniformity. 

"It  is  evident  that  the  law  in  this  respect  has  become  a  dead 
letter  and  wholly  inoperative.  The  attempts  to  tax  personal 
property  under  the  same  system  are  infinitely  more  farcical  and 
disgraceful." 

The  reasons  for  the  failure  are  as  follows: 

In  the  first  place,  a  large  part  of  personal  property  "  is  incor- 
poreal and  invisible,  easy  of  transfer  and  concealment,  not  ad- 
mitting of  valuation  by  comparison  with  any  common  standard, 
and  the  situs  or  locality  of  which  for  purposes  of  assessment  and 
taxation,  involves  some  of  the  oldest,  most  controverted  and  yet 
unsettled  questions  of  law.  *  *  *  It  is  obvious,  therefore, 
that  the  law  contemplates  the  doing  of  an  act  *  *  which 
cannot  be  done  without  the  fullest  co-operation  through  com- 
munication of  information,  of  the  taxpayer  himself;  and  yet  for 
the  imparting  of  which  the  two  most  powerful  influences  that  can 


40  STATE  OF  NEW  YORK 

control  human  action,  viz.,  love  of  gain  and  the  desire  to  avoid 
publicity  in  respect  to  one's  private  affairs,  co-operate  to  oppose." 

REPORT  OF  1893 

The  taxation  of  personal  property  is  "  unsatisfactory  and  un- 
just, and  if  no  better  plan  of  administration  be  devised  and 
carried  into  effect  than  that  now  in  existence,  it  is  idle  and  worse 
than  useless  to  attempt  the  taxation  of  personalty,  however  ob- 
jectionable the  alternative."  (Report  of  Counsel  to  Revise  the 
Tax  Laws  of  the  State  of  New  York,  1893.) 

REPORT  or  1900 

The  Joint  Committee  on  Taxation  for  the  year  1900  likewise 
found  that  the  personal  property  tax  was  a  failure,  and  did  not 
believe  any  reform  would  remedy  the  situation  unless  the  listing 
system  were  adopted.  This,  however,  the  committee  was  unwilling 
to  recommend.  It  found  that  while  the  first  returns  were  ap- 
parently good  under  the  listing  system,  it  eventually  drove  capital 
out  of  the  State. 

REPORT  OF  1907 

"  The  principal  difficulty  connected  with  our  system  of  local 
revenue  is  the  taxation  of  personal  property.  *  *  It  is  a 
universally  accepted  maxim  that  direct  taxation  of  the  citizen 
should  be  nearly  as  possible  in  proportion  to  his  ability  to  pay. 
The  actual  situation  in  New  York  involves  in  practice  the  very 
inverse  of  this  principle." 

As  a  result  of  its  study  the  committee  concluded : 

"  (1)  That  there  has  been  gradual  and  steady  increase  in  the 
value  of  real  and  personal  property ; 

"  (2)  That  personal  property  escapes  paying  its  share  of  the 
burden ; 

"(3)  That  the  greater  the  amount  of  personal  property  placed 
on  the  rolls,  the  larger  the  cancellations  or  reductions ; 

"  (4)  That  the  burden  falls  heaviest  on  the  residents  of  our 
State  and  the  smaller  taxpayer ; 

"  (5)   That  the  nonresidents  have  almost  ceased  to  pnv  taxes; 

"  (6)  That  the  collection  of  the  personal  property  tax  has  be- 
come more  and  more  difficult." 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  41 


CHAPTER  II 

CAUSES  OF  THE  FAILURE  OF  THE  PERSONAL  PROPERTY  TAX 
Briefly  stated,  the  objections  to  the  personal  property  tax  and 
the  reasons  for  its  failure  are  as  follows : 

(1)  Inequality  of  assessments. 

(a)  As  between  towns.     It  is  notorious,  and  the  facts  to  be 

submitted  later  will  show  beyond  question,  that  in  some  towns 
personal  property  is  assessed  at  something  like  true  values,  whereas 
in  others  no  attempt  whatsoever  is  made  to  reach  the  personal 
property  of  either  corporations  or  individuals,  or  if  it  is  reached, 
it  is  assessed  at  a  value  insignificant  as  compared  with  true  value. 
This  has  a  tendency  to  produce  throughout  the  State  "  isles  of 
safety  "  or  residential  districts  desirable  from  a  tax  standpoint  for 
both  individuals  and  corporations  who,  by  establishing  a  nominal 
residence,  and  by  the  payment  of  a  small  or  nominal  tax,  in  one 
town,  are  enabled  to  escape  their  proportion  of  the  taxes  in  the 
town  in  which  they  actually  reside.  Thus,  the  one  town  is  enabled 
to  increase  its  tax  base  and  lower  its  rate,  while  the  other  is 
deprived  of  large  amounts  of  taxable  property  and  is  obliged  to 
tax  that  which  remains  within  its  juristiction  at  a  higher  rate. 

(b)  As  between  citizens  of  the  same  town.     The  system  is 
practically  one  of  self -assessment,  under  which  the  dishonest  man 
who  is  willing  to  swear  off  his  taxes,  does  so  at  the  expense  of  the 
honest  man  whose  conscience  does  not  permit  him  to  do  so. 

(2)  The  personal  property  tax  at  a  general  property  rate,  let 
us  say  2  per  cent,  is  confiscatory  and  an  actual  incentive  to  dis- 
honesty.    Two  per  cent  is  the  equivalent  of  50  per  cent  of  the 
income  of  a  4  per  cent  bond,  and  no  country  in  the  world  in 
normal  times  has  or  can  successfully  impose  a  50  per  cent  income 
tax.     The  taxpayer  will  not  submit  to  it,  particularly  when  he 
knows  that  thousands  of  fellow  citizens,  in  many  cases  with  in- 
comes much  larger  than  his  own,  are  actually  evading  its  payment. 

(3)  The  theory  underlying  the  general  property  tax  is  that 
both  real  and  personal  property  should  be  taxed  at  the  same  rate 
and  on  the  same  basis.    Without  at  this  time  discussing  the  sound- 
ness of  this  particular  theory,  as  a  matter  of  practice,  real  estate 
bears   practically   the   entire   burden,    while  personal   property, 


42  STATE  OF  NEW  YORK 

though  theoretically  liable,  fails  to  contribute  its  share  to  the 
support  of  government. 

(4)  The  deduction  of  debts  invites  fraud  and  evasion,  yet  not 
to  allow  deduction  of  debts  is  in  some  cases  double  taxation.     As 
has  been  said,  "  Individuals  should  be  taxed  on  what  they  own, . 
not  on  what  they  owe."     This,  of  course,  is  not  true  in  the  case 
of  many  corporations  that  obtain  most  of  their  working  capital  by 
issuing  bonds. 

(5)  The  personal  property  tax  is  unequal  as  between  different 
grades  of  property.    It  falls  with  equal  weight  upon  unproductive 
property,  on  property  yielding  comparatively  small  income,  and 
on  property  bringing  in  a  very  large  return. 

(6)  Under  modern  conditions,  property  no  longer  represents 
the  true  test  of  ability  to  pay.     In  a  simple  agricultural  com- 
munity, where  personalty  is  for  the  most  part  tangible  and  visible, 
property  furnishes  a  fairly  equal  measure  of  a  man's  ability  to 
contribute  to  the  support  of  government ;  but  under  modern  busi- 
ness development  this  is  by  no  means  the  case.     Take  the  case  of 
the  merchant  with   a  large  turnover  and   a  comparatively  low 
profit.    His  ability  to  pay  taxes  is  by  no  means  the  equal  of  that 
of  the  merchant  with  a  small  stock  of  goods,  a  rapid  turnover  and 
large  profits;  yet  under  the  personal  property  tax  the  former 
rather  than  the  latter  will  pay  the  larger  tax.     Take  the  case  of 
the  manufacturer.     The  one  may  own  a  very  large  plant  with 
complicated,    expensive  machinery,    and   the   necessities   of   his 
business  may  require  him  to  carry  a  large  inventory.     He  may 
earn  but  a  small  return  on  his  investment.    Another  manufacturer 
in  another  line  may  have  a  smaller  plant,  much  less  valuable  ma- 
chinery, a  comparatively  light  inventory,  and  yet  because  of  the 
nature  of  his  business  may  have  a  greater  income.    Here  again  the 
ability  of  the  latter  to  contribute  is  greater  than  that  of  the 
former,  yet  the  former  under  the  personal  property  tax  pays 
the  heavier  share.     As  between  individuals,  the  lawyer  earning 
$50,000  a  year  pays  nothing  on  the  taxable  ability  represented 
by  these  large  earnings,  while  the  widow  or  the  retired  busi- 
ness man  or  wage-earner  with  $500  a  year  derived  from  accumu- 
lated savings  of  $10,000  is  compelled  to  turn  over  $200  of  it 
to  the  tax  gatherer.     The  investor  who  makes  an  unwise  invest- 
ment from  which  he  gets  little  or  no  return  pays  as  much  as  the 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  43 

fortunate  individual  enjoying  fat  dividends;  the  man  with  a  large 
unearned  income  and  extravagant  habits  gets  off  scotfree,  while 
the  thrifty  one  who  in  spite  of  a  lower  earning  capacity  and  less 
ability  to  pay  taxes  manages  to  lay  something  aside  is  taxed  on 
the  evidences  of  his  thrift. 

(7)  Personal  property  under  modern  conditions  consists  for 
the  most  part  of  securities,  credits  and  other  intangibles,  easy 
of   concealment   and   which   cannot   be   discovered   without  the 
co-operation  of  the  taxpayer  himself, —  a  co-operation  which  the 
taxpayer  declines  to  furnish,  and  which  experience  has  demon- 
strated cannot  be  compelled.     Moreover,  the  large  accumulations 
of  wealth  in  form  of  intangibles  are  usually  concentrated  in  the 
great  cities  under  conditions  which  make  it  well-nigh  impossible 
for  the  assessors  to  locate  the  owners  —  a  complete  change  from 
the  conditions  under  which  the  personal  property  tax  was  adopted, 
when  life  was  simple,  wealth  fairly  equally  distributed,  when 
people  lived  in  villages  or  small  towns,  and  when  each  man  knew 
not  only  what  his  neighbor  owned,  but  what  property  of  his  was 
assessed.    Even  in  so  far  as  tangible  personalty  is  concerned,  con- 
sider the  difficulty  which  confronts  the  average  assessor  who  may 
be  required  to  assess  accurately  anything  from  a  Rembrandt  pic- 
ture to  a  large  modern  industrial  plant.     The  fact  is  that,  at  the 
wages  paid  —  which  in  many  instances  do  not  exceed  three  dollars 
a  day  —  it  is   impossible   to   obtain   any  man  with   a  sufficient 
accumulation  of  knowledge  to  enable  him  to  deal  successfully  with 
a  field  so  wide  as  to  include  within  its  range  practically  every 
form  of  property  found  in  a  complicated  society. 

(8)  The  great  number  of  exempt  securities  makes  it  possible 
for  the  wise  investor  lawfully  to  escape  personal  property  taxation, 
leaving  the  tax  to  fall  on  those  not  sufficiently  fortunately  situated 
to  obtain  wise  legal  advice  and  on  those  ignorant  of  the  law. 

CHAPTER  III 
INJUSTICE  OF  THE  PERSONAL  PROPERTY  TAX 

All  semblance  of  justice  and  equity  has  long  since  left  the 
personal  property  tax,  which  has  been  suffered  to  remain  on  our 
statute  books  because  of  the  widespread  apathy  and  ignorance  of 
the  public  in  regard  to  taxation,  and  because  of  the  fact  that  it 
has  not,  generally  speaking,  been  enforced. 


44  STATE  OF  NEW  YORK 

(1)  As  Between  Tangible  and  Intangible  Personalty.  Tangible 
property  can  be  seen;  intangible  property  cannot  be  seen.  Tax 
assessors  find  it  comparatively  easy,  therefore,  to  discover  tangible 
property,  while  they  have  the  greatest  difficulty  in  locating  in- 
tangible property.  Everywhere  the  result  is  the  same  —  not  only 
is  a  much  larger  proportion  of  tangible  property  reached  for 
the  purposes  of  taxation,  but  that  proportion  reached  bears  a  much 
higher  rate  of  taxation  as  a  result  of  the  escape  of  intangibles. 

The  inequity  is  further  accentuated  by  the  fact  that  those  most 
able  to  pay  have  their  wealth  largely  invested  in  intangibles  and 
that  those  least  able  to  pay  have  their  wealth  largely  invested  in 
tangibles.  The  magnitude  of  this'  injustice  will  appear  as  we 
examine  the  effect  of  this  tax  upon  the  rich  as  compared  to  the 
poor,  upon  the  widows  and  orphans,  upon  the  farmers  as  compared 
with  owners  of  other  forms  of  wealth  and  upon  the  struggling 
business  as  compared  to  the  well-established  business.  In  every 
case  the  inequity  increases  with  the  inability  of  the  particular 
classes  to  bear  taxes. 

2.  As  Between  the  Poor  and  the  Wealthy.  Not  only  do  the 
poor  and  those  in  only  moderate  circumstances  have  their  wealth 
invested  in  easily  seen  and  easily  taxed  tangibles,  but  the  kind 
of  tangible  personalty  in  which  the  poor  man  invests  his  money, 
whether  it  be  in  his  household  effects  or  in  his  small  business, 
is  of  such  nature  that  the  ordinary  tax  assessor  is  familiar  with  it 
and  can  therefore  assess  at  well-nigh  its  true  value.  This  is  true 
as  well  of  the  tangible  personalty  that  makes  up  the  small  business 
concern  as  of  the  tangible  personalty  included  in  the  household 
goods  and  other  personal  effects.  In  the  case  of  the  wealthy 
man,  however,  the  case  is  a  very  different  one.  Not  only  is  a 
large  part  of  his  wealth  ordinarily  invested  in  intangibles,  but 
much  of  his  tangible  personalty,  whether  that  of  his  personal  ef- 
fects or  that  of  his  business,  is  of  a  kind  that  the  ordinary 
assessor  (in  his  daily  life)  is  unfamiliar  with,  and  it  is  also  of 
a  kind  that  is  difficult  of  valuation.  This  is  true  not  only  of 
the  wealthy  individual  but  of  the  wealthy  corporation  as  well.  In 
regard  to  the  former,  the  valuation  of  such  property  as  jewelry, 
works  of  art,  books,  etc.,  require  a  knowledge  and  skill  not 
possessed  by  the  average  assessor.  In  regard  to  the  rich  corpo- 


JOINT  LEGISLATIVE   COMMITTEE   ON   TAXATION  45 

rations,  such  as  mercantile  corporations,  carrying  large  stocks  of 
fine  fabrics,  jewelry,  etc.,  and  those  manufacturing  corporations 
having  machinery  of  great  value  as  well  as  large  stocks  of  products 
in  the  process  of  manufacture,  the  experience  of  forty-eight 
states  of  the  Union  discloses  with  unmistakable  clearness  that 
the  average  assessor  does  not  and  cannot  assess  these  subjects 
with  any  degree  of  fairness. 

When  we  come  to  investment  in  securities,  a  large  investor 
usually  has  the  knowledge,  or  can  obtain  such  advice,  as  will 
enable  him  to  invest  in  tax-exempt  securities,  while  the  small 
investors,  particularly  women,  are  apt,  through  ignorance,  to 
invest  in  taxable  bonds. 

3.  Concerning  Widows  and  Orphans  and  Trust  Estates.  If 
there  is  one  group  of  property  which  should  escape  with  reasonable 
taxation,  it  would  seem  to  be  that  property  the  income  from  which 
is  set  aside  for  the  .support  and  education  of  those  who  have  been 
deprived  through  death  of  the  head  of  the  family,  viz.,  the  widows 
and  the  orphans.  When  the  chief  bread-winner  dies,  a  record  of 
his  property  must  be  filed  in  the  probate  court,  where  it  is  easily 
accessible  to  the  tax  assessors.  Here  it  is  caught  and  taxed, 
while  similar  property  held  by  others  is  untaxed.  Were  it  taxed 
at  only  a  fair  rate,  it  would  still  be  questionable  whether  this 
property  ought  not  to  be  partially  exempt.  However,  it  is  not 
taxed  at  a  fair  rate,  but  at  a  rate  which  makes  the  personal  prop- 
erty tax  in  this  case  one  of  the  most  barbarous  to  be  found  in  any 
country.  Cases  are  frequent  where  as  high  as  25  to  50  per  cent 
of  the  total  income  set  aside  for  the  support  of  widows  and  orphans 
is  taken  by  this  tax.  How  serious  the  situation  is  was  well  ex- 
emplified by  investigation  made  by  one  of  the  witnesses  who  ap- 
peared before  the  Committee.  He  stated  that  he  found  that  in  one 
county  (not  in  the  State  of  New  York)  the  roll  showed  that  about 
20  to  25  per  cent  of  the  personal  property  taxes  were  paid  by 
women.  It  will,  of  course,  be  readily  agreed  that  women  do  not 
own  anything  like  25  per  cent,  of  personal  property  in  any  state. 
Another  witness  told  us  of  a  woman  whose  husband  had  died  leav- 
ing an  estate  all  invested  in  4  per  cent  bonds.  The  woman  was 
assessed  by  !N"ew  York  City's  Tax  Department  for  the  full  value 
of  the  bonds.  There  was  no  possibility  of  getting  the  tax  re- 


46  STATE  OF  NEW  YORK 

duced.  Counsel  advised  her  to  change  her  investments,  but  she 
refused  to  do  that  because  her  husband  had  made  them,  so  she 
was  obliged  to  leave  the  city  and  change  her  residence. 

A  simple  example  will  illustrate  how  this  tax  works.  Assume 
that  a  prudent  head  of  a  family  had  been  able  to  save  $15,000 
which  had  been  invested  in  municipal  bonds  yielding  four  per 
cent.  The  annual  income  to  the  widow  would  be  $600.  At  a  tax 
rate  of  2  per  cent,  on  the  value  of  this  personal  property,  the 
widow  would  be  compelled  to  surrender  $300  to  the  tax  authorities 
or  one-half  of  her  total  income.  In  some  localities  tax  rates  have 
risen  as  high  as  three  or  four  per  cent,  and  cases  are  not  unknown 
where,  had  the  tax  law  been  enforced,  the  widow  would  have  been 
deprived  of  her  entire  income.  Indeed,  cases  are  known  where 
the  tax  has  not  only  absorbed  all  of  the  income,  but  has  compelled 
the  owner  to  pay  an  additional  amount.  In  the  1915  New  York 
Tax  Conference,  Mr.  Lawson  Purdy  cited  such  a  case.  Before 
the  December,  1915,  hearings  of  the  Joint  Legislative  Committee 
on  Taxation,  Professor  Charles  J.  Bullock  of  Harvard  University 
testified  that  cases  of  such  gross  injustice  amounting  to  the  taking 
of  from  one-third  to  one-half  of  the  income  of  widows  and  orphans 
were  not  infrequent  where  the  general  property  rate  was  applied 
to  personalty.  Upon  this  point,  the  Report  of  the  Massachusetts 
Tax  'Commission  for  1908  speaks  as  follows: 

"  The  situation  is  made  worse  by  the  fact  that  the  local  tax 
rates  throughout  the  country  are  so  high  that  they  take  from 
the  holder  of  good  securities  an  excessive  proportion  of  his  income. 
According  to  the  United  .States  census,  the  average  rate  levied 
upon  property  assessed  for  local  taxation  in  the  United  States  in 
1902  was  about  2  per  cent,  of  the  capital  value  thereof,  or  as  tax 
rates  are  usually  reckoned  in  Massachusetts,  $20  on  each  $1,000 
of  the  assessed  valuation.  In  many  places  real  estate  was  so 
far  undervalued  that  a  tax  of  2  per  cent,  upon  the  assessed  value 
may  not  have  amounted  to  more  than  1  per  cent,  or  even  one- 
half  of  one  per  cent,  of  the  true  value  of  the  property.  But  per- 
sonal property,  if  returned  for  taxation,  must  be  valued  usually 
at  its  true  cash  value;  and  it  is  clear  that  a  tax  rate  of  2  per 
cent,  may  take  from  the  holder  one-third  or  one-half  of  his  in- 
come. Under  such  circumstances  few  persons  can  or  will  make 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  47 

returns  of  their  personal  estates ;  and  the  usual  result  is  that  this 
property  is  taxed  by  the  method  of  arbitrary  estimate,  or 
'  doomage ?.  When  returns  are  made  they  come  usually  from 
trustees  and  executors  of  small  estates,  who  cannot  easily  evade 
the  law,  and  have  less  inducement  to  do  so.  Thus  it  comes  about 
that  the  mx  on  personal  property  bears  with  exceptional  severity 
upon  widows  and  orphans,  the  most  helpless  class  in  the  commu- 
nity, and  is  most  easily  evaded  by  the  rich  and  powerful,  who 
can  best  afford  to  pay  it.  Instances  have  come  to  the  attention  of 
members  of  the  present  Commission  in  which  widows  are  paying 
upon  small  estates  taxes  that  take  as  much  as  40  or  50  per  cent,  of 
the  income;  whereas  in  the  same  communities  men  whose  tax- 
able property  would  probably  amount  to  millions  are  paying  a  few 
hundred  dollars  of  personal  taxes  upon  merely  nominal  assess- 
ments. These  conditions  are  not  peculiar  to  Massachusetts, — 
they  have  been  repeatedly  disclosed  by  the  reports  of  tax  com- 
missions in  other  States;  and  among  students  of  American  taxa- 
tion it  has  become  a  mere  truism  that  our  present  taxes  upon 
personal  property  actually  fall  upon  the  taxpayers  in  inverse 
proportion  to  their  ability  to  pay." 

4.  As  Between  Farms  and  Oilier  Forms  of  Wealth.  That 
the  farmers  bear  a  disproportionate  share  of  taxation  is  gen- 
erally known  and  accepted  by  most  of  the  informed  throughout 
the  United  States.  It  is  not  generally  known  by  the  farmers  or 
the  public  at  large,  however,  to  what  an  extreme  degree  this  dis- 
proportion is  carried.  It  is,  of  course,  well  known  that  most  of 
a  farmer's  personalty  is  in  a  tangible  form,  and  that  it  cannot 
be  hidden  from  the  tax  assessor.  Wherever  the  law  is  enforced 
the  farmers'  machinery  and  implements,  his  stock  and  other  tan- 
gibles not;  only  pay  a  much  higher  rate  than  their  share,  but  a 
rate  out  of  all  proportion  to  the  earning  power  of  such  property. 
This  disproportionate  rate  is,  of  course,  largely  made  up  of 
that  part  of  the  tax  burden  that  is  evaded  by  other  forms  of 
wealth.  The  full  significance  of  this  inequity  cannot  be  grasped 
without  comparing  the  rates  upon  agricultural  property  and  in- 
come with  that  of  the  other  principal  industries  of  the  State. 

A  study  of  California  in  this  regard  is  of  much  value  to  New 
York.  A  few  years  ago  a  very  careful  investigation  was  made 


48  STATE  OF  NEW  YORK 

of  the  relative  tax  burdens  borne  by  the  various  classes  of  wealth 
in  California,  and  the  results  of  this  investigation  were  set  forth 
in  the  1906  California  Tax  report.  Most  of  the  statistics  given 
immediately  below  are  either  copied  from  that  report  or  represent 
computations  based  upon  the  data  there  set  forth.  The  following 
table  taken  from  page  68  of  this  report  is  a  comparative  statement 
of  manufacturing  industries  and  agriculture  in  respect  to  the 
capital  investment,  percentage  of  total  capital  value  invested  in 
realty  and  personalty,  and  percentage  of  each  taxed: 

COMPARISON  OP  TAXES  ON  MANUFACTURING  AND  FARMS  IN  CALFORNIA 

Percentage  of  total  capital 

Aggregates  Manufac-         Agricul- 

Manufactures  Agriculture  tures  ture 


Capital  total   

$205,  395,  025 

$796,  527,  955 

100.0 

100.0 

Land    

34,  735,  416  \ 

630,  444,  960 

16.9 

79.0 

Buildings  

22,  562,  385 

77,  468,  000 

11.0 

9.7 

Machinery,    resp.    imple- 

ments    

62,  440,  759 

21,311,670 

30.4 

2.7 

Other  assets  

85,656,465 

67,  303,  325 

41.7 

8.5 

Assessed  value  

63,  500,  000 

474,  731,  497 

31.0 

65.0 

Taxes  

1,  049,  932 

9,  030,  000 

.51 

1.14 

Gross  produce  

302,  874,  761 

131,  690,  606 

147.0 

16.5 

Net  product  

52,  172,  862 

91,  419,  866 

25.4 

11.5 

Taxes  of  gross  

.346 

6.86 

Taxes  of  net  product  

2.01 

9.88 

This  table  discloses  some  very  interesting  facts;  and  these 
facts  are  of  considerable  interest  to  New  York,  because  they 
illustrate  a  condition  in  California  very  similar  to  the  one  now 
prevailing  in  New  York  'State.  At  least  this  is  true  in  so  far  as 
they  illustrate  the  inequity  existing  between  farm  property  and 
that  of  other  forms  of  wealth.  It  should  be  remembered,  how- 
ever, that  the  actual  inequity  as  between  these  two  forms  of 
wealth  is  probably  greater  in  New  York  than  in  California. 

The  above  table  shows  that  while  agriculture  pays  6.86  per  cent 
of  its  gross  product  in  taxes,  manufactures  pay  only  .34  per 
cent  or  one-third  of  1  per  cent.  In  other  words,  measured  in 
terms  of  gross  product,  the  tax  burden  upon  agriculture  was 
about  twenty  times  as  heavy  as  that  upon  manufactures.  In 
terms  of  net  product,  the  disproportion,  though  not  so  extreme,  is 
still  very  large.  The  table  shows  that  while  manufacturers  pay 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  49 

2.01  per  cent  of  net  products  in  taxes,  agriculture  pays  9.88  per 
cent  in  taxes.  In  other  words,  the  tax  burden  measured  in  terms 
of  net  product  is  nearly  five  times  upon  agriculture  what  it  is 
upon  manufacture.  It  should  be  noted  here  that  this  statement  is 
based  upon  the  assumption  that  manufactures  pay  approximately 
2  per  cent  of  net  income  in  California.  This  rate  is  probably 
higher  than  that  borne  by  manufactures  in  New  York  State. 
Statistics  such  as  those  gathered  by  the  Federal  Census  indicate 
that  the  proportion  borne  by  manufactures  in  New  York  is  less. 
These  facts  are  brought  out  in  more  detail  in  part  VIII  of 
this  report  which  deals  with  the  taxation  of  manufacturing 
corporations. 

The  following  table  summarizes  the  tax  burdens  borne  by  Cali- 
fornia farms : 

Per  cent  of  taxes  to  true  value 1 . 14 

Per  cent  of  taxes  to  gross  returns 6.86 

Per  cent  of  taxes  to  net  returns,  including  farmer's  own 

compensation  and  certain  expenses 9 . 88 

The  following  tabulation  compares  the  percentage  of  tax  paid 
by  farms  and  manufactures : 

Ratio  of  farm 
taxes  to  manufac* 
Farms  Manufactures        turing  taxes 

Percentage  paid  on  capital  value 1.14%        1/2  of  1%  3  to  1 

Percentage  paid  on  gross  income 7.00%         1/3  of  1%  20  to  1 

Percentage  paid  on  net  income 10.00%  2%  5  to  1 

In  regard  to  the  comparative  burdens  borne  by  various  kinds 
of  wealth  in  New  York  State,  no  study  similar  to  that  of  Cali- 
fornia has  been  made  with  the  same  degree  of  care  and  thorough- 
ness. The  New  York  problem  is  much  more  complex  than  that 
of  California.  The  multiplicity  of  corporation  taxes  at  varying 
rates  and  upon  different  bases  makes  the  difficulties  of  a 
similar  study  for  New  York  almost  insurmountable.  We  have, 
however,  sufficient  data  to  justify  a  rough  comparison  between 
New  York  and  California  and  between  New  York  and  states 
like  Minnesota  and  Michigan  that  have  also  made  studies  similar 
to  that  of  California.  These  comparisons  all  indicate  that  the 
disparity  as  between  agriculture  and  other  forms  of  wealth  is 
even  greater  in  New  York. 

An  examination  of  Minnesota's  experience  is  pertinent.     The 


50  STATE  OF  NEW  YORK 

following  facts  are  gathered  from  the  experience  of  Minnesota 
as  it  appears  in  the  1908  Report  of  the  State  Tax  Commission 
of  Minnesota  (pp.  54-5) : 

"  The  special  commission  on  revenue  and  taxation  of  1906  ap- 
pointed by  the  governor  of  California  declared  that  the  per- 
centage of  taxes  to  the  gross  products  for  manufactures  in  that 
state  was  .346,  or  about  one-third  of  1  per  cent;  for  agriculture 
the  relation  of  taxes  to  total  product  was  6.86  per  cent.  On  the 
net  product  of  manufactures  the  commission  found  the  relation 
of  taxes  to  be  2.01  per  cent,  and  for  agriculture  9.88  per  cent. 
The  basis  of  these  figures  is  the  United  States  census  of  1900. 
Applying  the  same  methods  and  the  same  data  to  Minnesota,  a 
somewhat  different  result  is  obtained.  Expressed  in  the  terms  of 
product,  the  percentages  of  taxes  to  the  returns  secured  from 
manufacturing  and  agriculture  are  as  follows : 
"  Taxes  to  gross  product — Manufacturing 3223% 

Agriculture 4.7200% 

"  Taxes  to  net  product — Manufacturing 2 . 0480% 

Agriculture 6 . 8850% 

"  TABLE  SHOWING  COMPARISON  OF  AGGREGATES  AND  PERCENTAGES  OF  INVEST- 
MENTS IN  MANUFACTURES  AND  AGRICULTURE  IN  MINNESOTA 

Aggregates  Percentages 


Capital  Items 
Land    

Manufactures 
$29,  548,  954 

Agriculture             Manufactures 
$559,301,900             17.810 
110,220,415             11.980 
30,099,230             22.886 
89,063,097            47.324 

Agriculture 

70.90 
13.97 
3.83 
11.30 

Buildings  . 

19,  850  136 

Machinery    

37,  953,  943 

Other    assets 

78  479  213 

Total  capital $165,  832,  246     $788,  684,  642  100 . 00  100 . 00 

"  The  assessed  value  of  manufactures  was  $32,509,514,  and 
of  agriculture  $299,567,765.  Reduced  to  percentages,  the  rela- 
tion of  the  assessment  of  manufactures  to  capital  was  19.6  per 
cent,  and  of  agriculture,  37.9  per  cent.  The  manufactures  paid 
$846,570  in  taxes  and  agriculture  $7,609,021;  in  other  words, 
.51  per  cent  and  .96  per  cent,  respectively,  of  their  capital 
values.  The  gross  product  of  the  manufacturers  of  the  State 
amounted  to  $262,655,881,  or  158.3  per  cent  of  the  capital  in- 
vested in  manufactures,  and  the  agricultural  product  was  $161,- 
217,304,  or  20.4  per  cent  of  the  capital  invested.  In  the  case  of 
the  net  product,  the  manufactures  of  the  state  earned  $41,318,- 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  51 

363,  or  24.9  per  cent  on  their  capital,  and  agricultural  interests 
$111,050,884,  or  14.08  per  cent. 

"  Manufacturers  pay  a  little  more  than  2  per  cent  on  their  net 
product,  and  farmers  pay  more  than  three  and  one-third  times  as 
much  as  when  measured  on  the  same  basis;  and  on  the  basis  of 
gross  product  the  farmer  pays  more  than  eleven  and  one-half 
times  the  amount  turned  in  by  the  manufacturer  for  taxes.  On 
a  net  income  basis  the  manufacturer  pays  2  per  cent  of  it  for 
taxes,  but  the  farmer  pays  nearly  7  per  cent  of  his  net  income, 
which  includes  the  benefits  he  receives  from  his  garden,  poultry, 
etc.  And,  further,  the  farmer's  net  income  includes  his  reward 
for  management  as  well  as  interest  return.  These  items  make 
the  difference  still  more  marked. 

"  These  are  eloquent  figures.  While  the  commission  is  not 
ready  to  accept  them  in  their  full  meaning  as  conclusive,  they  do 
show  clearly  the  general  situation." 

The  experience  of  Michigan  is  also  of  much  value,  although 
the  disparity  between  farms  and  manufactures  is  probably  not  so 
great  as  it  is  in  the  State  of  New  York.  The  following  table  is 
taken  from  the  1911  "  Report  of  the  Commission  of  Inquiry  Into 
Taxation  of  Michigan"  (page  9). 

It  gives  the  rate  of  taxes  per  thousand  of  actual  value  for  farms, 
banks,  residence,  railroads,  manufacturing  corporations,  public 
service  corporations  and  mines.  It  also  gives  a  comparison  of 
the  value  and  taxes  paid  by  each  of  these  classes  except  residences : 


Values 

Taxes             Rate 

per  $1.000 

City  real  estate  

$14.85 

Farms  

$1,  000,  000,  000 

$10,  000,  000 

10.00 

Banks  and  trust  companies  .... 

75,  000,  000 

1,  250,  000 

17.00 

Railroads  

212,  000,  000 

4,  378,  000 

20.65 

Sleeping  car,  express,  car  loaning 

and  telephone  and  telegraph 

companies  

24,  000,  000 

493,  000 

20.67 

Manufactures  

750,  000,  000 

3,  938,  000 

5.31 

Mines  

250,  000,  000 

1,  750,  000 

7.00 

Electric    railway,    power,    heat, 

light  and  gas  companies  

130,  000,  000 

900,  000 

7.00 

An  examination  of  this  table  discloses  the  fact  that  manufac- 
tures bear  the  lowest  rate  of  taxation  of  any  class  of  wealth  in 
Michigan,  this  rate  being  about  one-fifth  of  that  of  the  public 
service  corporations,  about  one-half  that  of  farm  property  and 


52  STATE  OF  NEW  YORK 

about  one-third  that  of  city  real  estate.  This  table  is  of  value  in 
so  far  as  it  throws  light  upon  the  disproportion  of  the  tax  burden. 
It  should  be  clearly  borne  in  mind,  however,  that  the  dispro- 
portion between  manufactures  and  farms  is  very  much  less  than 
in  either  California  or  New  York. 

In  view  of  the  great  inequality  as  between  the  actual  assess- 
ment of  farmers  and  manufacturers,  it  is  of  considerable  interest 
to  know  whether  any  compensation  is  found  in  the  difference  in 
their  tax-paying  ability.  The  following  quotation  from  page  66 
of  the  1906  California  Report  is  very  clear  upon  this  point: 

"  The  same  facts  may  be  exhibited  in  another  way.  After 
allowing  $2,446,238  for  the  average  annual  increase  in  value  of 
farm  property  and  taking  6  per  cent  as  interest  on  the  value  of 
farm  property,  the  census  estimates  that  the  145,801  persons  en- 
gaged in  agriculture  earned  an  average  of  $499.70  in  1899.  The 
113,155  persons  engaged  in  manufactures  earned  an  average  of 
$870. 

"  It  would  seem,  then,  that  from  the  per  capita  earnings  manu- 
facturers could  afford  to  pay  nearly  75  per  cent  more  taxes  than 
could  the  farmers.  As  a  matter  of  fact,  however,  the  farmers 
pay  10  per  cent  of  their  net  earnings  and  manufacturers  only 
2  per  cent  of  their  net  earnings." 

The  present  personal  property  tax  works  a  severe  hardship 
upon  the  property  of  farmers,  irrespective  of  whether  the  tax  is 
rigidly  enforced  or  not.  If  the  tax  is  actually  enforced  upon 
the  personalty  of  farmers  it  obviously  lays  a  highly  dispropor- 
tionate burden  upon  that  part  of  the  farmer's  wealth.  In  an- 
swer to  this  statement  it  is  often  said  that  the  personal  property 
tax  does  not  discriminate  against  the  farmer  inasmuch  as  the 
average  assessor  does  not  actually  assess  any  considerable  amount 
of  the  tangible  personalty  found  upon  farms.  It  is  true  that  to 
the  extent  that  an  individual  farmer  is  underassessed  by  the 
local  tax  officer  he  escapes  a  certain  part  of  a  highly  dispropor- 
tionate burden.  It  is  utterly  fallacious,  however,  to  infer  that  in 
escaping  to  this  extent  the  farmer  is  freed  from  the  inequities 
of  the  personal  property  tax.  The  greatest  injustice  to  the 
farmer  arises  from  the  indirect  results  of  the  almost  complete 
failure  of  the  general  property  tax  as  applied  to  personalty  in 
general.  When  practically  one-half  of  the  tax  base  escapes  in 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  53 

the  form  of  personalty,  the  rate  upon  the  remaining  half  must  be 
double  what  the  rate  would  be,  were  it  levied  uniformly  upon  the 
entire  base.  To  the  extent,  therefore,  that  anyone's  wealth  is 
composed  of  real  estate,  to  just  that  extent  does  he  bear  an  in- 
creased disproportionate  share  of  the  tax  burden. 

A  reference  to  the  above  tables  from  the  California  report  is 
illuminating  at  this  point.  The  first  table  shows  that  79  per 
cent  of  the  total  value  of  agriculture  is  invested  in  land  and  that 
88.7  per  cent  is  invested  in  land  and  buildings.  Manufactures, 
on  the  other  hand,  have  invested  in  land  only  16.9  per  cent  of 
total  capital  and  only  27.9  per  cent  in  land  and  buildings.  Per- 
sonalty of  manufactures  makes  up  72.1  per  cent,  of  which  not 
less  than  50  per  cent  is  intangible.  The  significance  of  these 
figures  must  not  be  overlooked.  They  show  not  only  that  that 
part  of  the  fair  share  of  personalty  escaping  taxation  is  borne  to 
a  very  large  degree  by  agriculture,  but  that  that  particular  bur- 
den is  partly  accounted  for  by  the  failure  of  the  assessors  to  reach 
the  very  large  per  cent  of  the  capital  of  manufacturing  and  other 
corporations  that  is  represented  by  personalty. 

It  must  not  be  understood  that  manufactures  represent  the  only 
group  of  wealth  that  shoves  off  part  of  its  tax  burden  upon  the 
farmer.  The  manufacturing  industry  has  been  used  for  pur- 
poses of  illustration,  and  did  space  permit,  it  could  be  shown  that 
other  business  corporations  as  well  as  some  of  the  public  service 
and  financial  corporations  fail  to  bear  a  tax  burden  proportion- 
ately as  heavy  as  that  of  agriculture. 

In  answer  to  the  above  arguments  it  is  often  said  that  the 
farmer  suffers  no  injustice  because  as  his  tax  burden  increases, 
the  value  of  his  land  increases.  Wherever  the  increase  in  value 
of  his  land  assumes  the  form  of  the  so-called  "  unearned  incre- 
ment ",  this  fact  may  be  true  in  those  particular  cases  in  which 
the  increment  is  as  large  as  the  tax  increase.  In  those  cases,  how- 
ever, where  the  increased  value  of  the  farm  has  been  due  to  the 
labor  and  capital  investment  of  the  farmer,  it  cannot  be  truth- 
fully said  that  the  increased  value  "  takes  care  of  "  the  increase 
in  the  tax  burden.  In  any  case  where  the  property  has  not  in- 
creased in  value,  the  increased  burden  is  a  heavy  one. 

In  summing  up  the  case  of  the  farmer,  the  evidence  is  well 
nigh  overwhelming  that  the  general  property  tax  in  so  far  as  it 


54:  STATE  OF  NEW  YORK 

pertains  to  personalty,  directly  or  indirectly,  imposes  on  him  an 
increasingly  disproportionate  burden. 

5.  Injustice  as  Between  Various  Types  and  Classes  of  Enter- 
prises.— As  the  personal  property  tax  is  now  levied  in  New  York, 
it  constitutes  not  only  a  serious  impediment  to  the  development  of 
some  businesses,  but  a  constant  annoyance  to  many  branches  of 
business.     It  is  unjust  as  between  various  units  of  business  and 
types  of  corporations.     It  is  unjust  as  between  mercantile  and 
manufacturing  corporations    and    it    is    unfair    to  corporations 
within  the  same  group.     The  extreme  to  which  this  unfairness 
is  carried  is  illustrated  by  the  ridiculous  differences  in  the  per- 
centage of  personalty  assessment  to  total  assessment  in  the  same 
counties.     In  the  same  type  of  business,  the  ratio  of  personalty 
to  realty  sometimes  varies  from  1  to  2,  to  1  to  75.     In  the  same 
town  the  personalty  of  manufactures  escapes  while  the  personalty 
of  mercantile  corporations  is  assessed.     Moreover,  local  mercan- 
tile corporations  are  taxed  upon  personalty,  while  foreign  corpor- 
ations, doing  large  business  next  door  and  carrying  large  stocks  of 
personalty,  are  taxed  neither  in  the  locality  nor  at  their  domicile. 

The  unfairness  as  between  manufacturing  corporations  of 
nearby  competing  towns  is  often  very  great.  In  fact  the  present 
investigation  discloses  the  fact  that  in  general  throughout  the 
State  of  New  York  the  personal  property  tax  bears  to  business 
the  relation  of  an  unmitigated  nuisance.  Were  the  law  fully 
enforced,  it  would  drive  business  out  of  New  York ;  with  present 
sporadic  enforcement  it  falls  with  inequality  and  injustice. 

6.  As  Between  the  Various  Counties  in  New  York  State. — 
Reference  to  the  comparative  statistical  tables  in  the  Appendix  will 
show  with  what  wide  difference  personalty  is  actually  assessed  in 
the  different  counties  of  the  State.     When  the  direct  State  tax 
is  levied,   the  inequalities  in  the  assessment  of  real  estate  are 
partly  remedied  by  equalization.     With  personalty,  however,  all 
inequalities  remain,  because  the  board  of  equalization  does  not 
equalize  personal  property,  but  accepts  the  returns  of  the  various 
counties.     Thus  the  more  efficient  the  personal  property  tax  is 
levied  in  any  county,   the  higher  the  percentage   of  the  direct 
•State  tax  that  county  is  required  to  pay.     In  other  words,  the 
present  law  penalizes  every  county  in  proportion  to  its  efficiency 
in  enforcing  the  law. 


PART  IV 

FAILURE  OF  THE  PERSONAL  PROPERTY  TAX  IN 
NEW  YORK 

One  of  the  main  purposes  for  which  this  Joint  Legislative  Com- 
mittee on  Taxation  was  appointed  was  to  seek  out  that  property 
which  is  now  escaping  and  to  recommend  changes  that  would 
equalize  the  tax  burden  by  broadening  the  base. 

For  many  years  it  has  been  the  belief  of  a  large  number  of  tax- 
payers that  the  weakest  point  in  our  present  system  is  the  per- 
sonal property  tax;  and  this  applies  both  to  the  individuals  and 
the  corporations.  For  that  reason  the  Committee  early  deter- 
mined to  make  a  most  careful  investigation  into  the  working  of 
the  personal  property  tax. 

CHAPTER  I 
GENERAL  SCOPE  OF  THE  COMMITTEE'S  INVESTIGATION 

At  one  time  or  another  the  Committee  has  attempted  to  investi- 
gate by  every  known  method  the  success  or  failure  of  the  personal 
property  tax.  In  this  investigation  the  Committee  approached 
the  subject  by  not  less  than  eleven  different  avenues,  as  follows : 

(1)  An  investigation  of  the  assessment  of  the  personal  prop- 
erty tax  in  the  sixty-two  counties  of  the  State  by  means  of  cor- 
respondence with  local  officers,  such  as  the  clerks  of  the  board  of 
supervisors,  county  treasurers,  etc. 

(2)  An  investigation  of  the  same  subject  by  means  of  inspect- 
ing the  records  on  file  in  the  office  of  the  State  Board  of  Tax 
Commissioners. 

(3)  An   investigation   in  which   investigators  were  sent   into 
a  selected  list  of  counties  to  examine  the  records  in  the  offices  of 
the  town  and  county  collectors,   assessors,   etc.,   as  well   as  the 
records,  so  far  as  certificates  of  incorporation  were  concerned, 
filed  in  the  county  recorders'  offices. 

(4)  An  examination  of  data  gathered  by  an  employee  of  the 
State  Board  of  Tax  Commissioners  in  regard  to  the  assessment 
of  corporations  in  a  particular  county  under  Section  12. 

(5)  An  examination  of  data  furnished  by  a  member  of  the 


56  STATE  OF  NEW  YORK 

Constitutional  Convention  in  regard  to  the  assessment  of  the  per- 
sonal property  of  corporations  under  Section  12  in  another  county 
that  had  been  called  to  the  Committee's  attention. 

(6)  An  investigation  of  the  records  of  the  Commissioners  of 
Taxes  and  Assessments  of  the  City  of  New  York  for  the  years 
1908,  1909,  1910,  1911,  1912,  1913  and  1914,  containing  data 
as  to  the  following  points : 

(a)  The  tentative  personal  property  assessment  of  resi- 
dent personal,  estates,  corporations  resident  and  corporations 
nonresident. 

(b)  The  amounts  cancelled. 

(c)  The  amount  retained  on  the  final  assessment  rolls. 

(7)  An  examination  of  three  reports  prepared  within  recent 
years  upon  the  same  subject. 

(8)  An  investigation  into  the  amount  of  personal  property 
taxes  paid  by  some  two  hundred  corporations  selected  at  random, 
information  concerning  which  could  not  be  found  in  Moody's 
Manual,  Poor's  Manual  and  elsewhere. 

(9)  An  investigation  into  the  personal  property  tax  paid  by 
another  list   of   some   250   corporations   selected   at   random  by 
means  of  statements  furnished  by  the  corporations  themselves. 

(10)  An  examination  of  the  Federal  Census  Eeports  as  to  the 
relative  percentages  of  personal  property  tax  collected  in  New 
York  and  other  states. 

(11)  An  examination  of  data  filed  by  the  State  Comptroller 
and  the  State  Board  of  Tax  Commissioners  as  to  the  relative 
increase  and  decrease  of  personal  property  tax  and  other  taxes, 
and  as  to  the  effect  of  the  method  of  reaching  certain  forms  of 
personalty  by  means  of  specific  taxes  upon  the  yield  of  that  part 
of  the  personal  property  tax  assessed  at  the  general  property  rate. 

In  the  first  place,  the  Committee  attempted,  through  the 
local  officers,  viz.,  the  clerks  of  the  boards  of  supervisors,  clerks 
of  the  county  treasurers,  etc.,  to  obtain  information  concerning  the 
success  of  the  personal  property  tax  in  the  sixty-two  counties  of  the 
State.  At  the  time  of  this  investigation  letters  were  sent  to  one  or 
more  of  these  local  officers  in  every  one  of  the  counties,  and  an 
effort  was  made  at  different  times  to  obtain  information  upon 
some  twelve  or  fifteen  points  that  might  be  used  in  one  way  or 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  57 

another  as  a  basis  for  an  estimate  of  the  success  or  failure  of  the 
personal  property  tax.  The  results  of  the  Committee's  effort  along 
this  line  of  investigation,  after  repeated  attempts,  were  very  dis- 
couraging. Some  of  the  local  officers  attempted  by  every  means 
to  assist  the  Committee  in  this  investigation,  and  the  Committee 
is  indebted  especially  to  the  officers  in  a  number  of  localities  for 
considerable  work  and  some  valuable  material. 

In  the  hope  of  obtaining  more  complete  information  in  regard 
to  the  amount  of  personal  property  tax  collected  from  resident 
natural  persons,  resident  corporations,  nonresident  natural  per- 
sons and  nonresident  corporations,  the  Committee  investigated 
the  statistical  information  which  is  filed  in  the  Department  of 
Statistics  of  the  State  Board  of  Tax  Commissioners. 

'Section  61  of  the  Tax  Law  provides  as  follows : 

"  Statement  of  valuation  to  be  forwarded  to  state  board  of  tax 
commissioners.  The  clerk  of  each  board  of  supervisors  shall, 
on  or  before  the  second  Monday  in  December,  transmit  to  the 
state  board  of  tax  commissioners  in  the  form  to  be  prescribed 
by  such  state  board  of  tax  commissioners  a  certificate  or  return 
of  the  aggregate  assessed  and  equalized  valuation  of  the  real 
and  personal  estate  in  each  tax  district  as  the  valuation  of  such 
real  estate  has  been  corrected  by  such  board,  and  the  amount  of 
tax  assessed  thereon  for  town,  city,  school,  county  and  state  pur- 
poses. Also  the  aggregate  assessed  valuation  of  personal  prop- 
erty classified  as  follows : 

"  1.  Property  of  resident  natural  persons  assessed  pursuant  to 
section  twenty-one. 

"  2.  Property  held  by  agents,  trustees,  guardians,  executors  or 
administrators,  assessed  pursuant  to  sections  eight  and  thirty-three. 

"  3.  Property  of  domestic  corporations  assessed  pursuant  to 
section  twelve. 

"  4.  Property  of  nonresident  natural  persons  assessed  pursuant 
to  subdivision  one  of  section  seven. 

"  5.  Property  of  nonresident  natural  persons  assessed  pursu- 
ant to  subdivision  two  of  section  seven. 

"  6.  Property  of  foreign  corporations  assessed  pursuant  to  sec- 
tion seven. 


58  STATE  OF  NEW  YORK 

"  In  the  City  of  New  York  such  report  shall  be  made  by  the 
department  of  taxes  and  assessments. 

"  The  state  board  of  tax  commissioners  shall  certify  to  the 
comptroller,  on  his  request,  before  the  thirty-first  of  December  in 
each  year,  such  extracts  or  items,  from  the  returns  above  men- 
tioned, as  he  may  desire." 

Were  this  law  followed,  the  Committee  would  be  able  to  obtain 
a  mass  of  valuable  data  for  purposes  of  investigating  the  degree 
of  success  of  the  personal  property  tax  in  New  York  State. 

For  the  purposes  of  this  investigation,  the  Committee's  expert 
went  through  the  records  in  the  Bureau  of  Statistics  of  the  State 
Board  of  Tax  Commissioners  at  Albany.  Of  the  sixty-two  counties 
of  the  State,  it  was  found  that  with  the  exception  of  four  or  five 
counties,  none  of  them  filed  the  complete  information  required 
by  section  61  of  the  Tax  Law.  Of  the  six  groups  of  informa- 
tion required  by  section  61,  most  of  the  counties  failed  to  file 
in  complete  form  most  of  the  information  required  under  subdi- 
vision 1.  A  few  of  the  counties  filled  out  sporadically  the  informa- 
tion required  under  subdivision  2.  Unfortunately,  nearly  all  of 
the  counties  failed  to  file  the  information  required  under  subdi- 
vision 3.  Inasmuch  as  the  information  required  under  subdivi- 
sion 3  relates  to  domestic  corporations  assessed  pursuant  to  sec- 
tion 12,  it  was  impossible  to  obtain  the  very  data  which  was  neces- 
sary for  purposes  of  investigating  the  most  important  phase  of 
the  personal  property  tax  in  New  York  State.  The  information 
called  for  by  subdivisions  4  and  5  was  also  lacking  in  more  than 
80  per  cent  of  the  counties.  It  was  particularly  unfortunate  that 
this  data  was  lacking.  One  of  the  important  conclusions  reached 
by  the  Special  Tax  Commission  of  1906,  was : 

(1)  That  the  burden  falls  heaviest  upon  the  residents  of  our 
own  State,  and  principally  upon  the  small  taxpayer. 

(2)  That  nonresidents  find  it  easier  to  escape  taxation  and 
have  almost  ceased  to  pay  any  tax. 

The  failure  of  the  local  officers  to  return  the  information  re- 
quired under  subdivisions  4  and  5  rendered  it  impossible  in  this 
particular  branch  of  the  investigation  to  determine  to  what  degree 
the  conditions  set  forth  by  the  1906  Committee  were  still  true. 

The  data  concerning  the  assessment  of  the  property  of  foreign 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  59 

corporations  required  to  be  filed  by  subdivision  6  of  section  61, 
is  also  lacking  from  all  but  a  very  few  of  the  reports  filed  with 
the  Tax  Commission.  While  from  these  records  in  themselves  it 
would  be  impossible  to  conclude  that  foreign  corporations  escape 
their  fair  share  to  a  large  degree,  yet  the  absence  of  this  data, 
together  with  other  information  obtained,  establishes  a  fair  pre- 
sumption that  the  foreign  corporations  are  not  assessed  for  per- 
sonal property  in  most  of  the  localities. 

Failing  to  obtain  sufficient  data  for  the  purposes  of  anything 
like  a  complete  investigation  of  the  personal  property  tax  in  New 
York  State,  the  Committee  next  resorted  to  the  method  of  personal 
investigation. 

CHAPTER  II 
PERSONAL  INVESTIGATION  IN  THE  SIX  COUNTIES 

For  the  purposes  of  this  report,  the  names  of  the  counties  are 
not  given  but  are  designated  as  "  County  A,"  "  B,"  "  C,"  "  D," 
"  E  "  and  "  F."  The  reason  for  this  designation  appears  as  fol- 
lows :  In  the  time  at  the  disposal  of  the  Committee  it  was  obvi- 
ously impossible  to  investigate  by  means  of  personal  visits  the 
enforcement  of  the  personal  property  tax  in  all  of  the  counties. 
Out  of  the  sixty-two  counties  it  was  found  possible  to  send  an 
investigator  into  only  six.  Inasmuch  as  the  investigation  in  these 
counties  disclosed  the  fact  that  many  of  the  local  officials  were  not 
assessing  personal  property  of  corporations  according  to  the  law, 
it  seemed  unfair  to  give  the  names  of  the  counties  and  towns. 
Were  these  six  counties  the  only  offenders  against  the  law,  it  might 
be  wise  to  publish  the  fact.  But  inasmuch  as  they  were  selected 
as  representative  counties,  and  inasmuch  as  the  practice  of  the 
local  officers  is  in  all  probability  no  worse  in  these  six  counties  and 
the  towns  contained  therein  than  in  the  rest  of  the  State  at  large,  it 
seems  only  fair  to  use  them  as  typical  of  the  State  without  sing- 
ling them  out  from  the  other  counties.  In  justice  to  the  truth,  it 
ought  to  be  said  that  the  six  counties  discussed  below,  notwith- 
standing their  deficiencies,  actually  came  nearer  to  enforcing  the 
law  than  some  other  counties  which  were  not  investigated  by  this 
method. 

County  A. —  County  A  contains  a  large  mercantile  and  manu- 
facturing city  and  seven  towns,  in  most  of  which  exist  important 


60  STATE  OF  NEW  YOEK 

corporations  claiming  some  town  of  the  county  as  its  principal 
place  of  business.  An  examination  of  the  statistics  gathered 
in  this  county  reveals  three  striking  facts. 

(1)  There   is   the   greatest   inequality   in   the    assessment   of 
corporations  as  between  the  various  localities  within  the  county. 

(2)  Considerable  inequality  exists  as  between  mercantile  and 
manufacturing  corporations,  most  mercantile  corporations  being 
taxed,  most  manufacturing  corporations  escaping  in  whole  or  in 
part. 

(3)  The  ratio  of  the  real  property  to  personal  property  varies 
greatly  throughout  the  county. 

The  facts  in  regard  to  this  county  may  be  summarized  as  fol- 
lows: 

In  one  locality  every  mercantile  corporation  listed  as  paying 
real  estate,  also  pays  a  personal  property  tax.  (We  have  no  way 
of  determining  whether  or  not  the  corporations  pay  all  that  they 
ought  to  pay  under  section  12.)  Nearly  every  corporation 
claiming  this  town  as  the  principal  place  of  business,  pays  some- 
thing under  section  12. 

In  striking  contrast  to  this  locality  stand  the  other  seven  towns 
of  the  county.  Some  of  them  contain  large  and  important 
mercantile  or  manufacturing  corporations.  However,  not  a  single 
one  assesses  a  dollar's  worth  of  personal  property  to  manufactur- 
ing or  mercantile  corporations.  These  seven  towns  contain 
eleven  mercantile  corporations  and  fifty-seven  manufacturing 
corporations  listed  as  paying  real  property  tax.  All  of  these  cor- 
porations, except  fifteen,  claim  as  their  principal  place  of  busi- 
ness one  of  the  towns  within  the  county,  and  therefore  should  pay 
personal  property  taxes  at  such  place. 

As' to  the  exact  extent  of  the  evasion  of  the  personal  property 
tax  by  corporations  in  the  county  as  a  whole,  it  is  very  difficult 
to  determine.  There  is  no  way  by  which  the  Committee,  in  the 
time  at  its  disposal,  could  ascertain  exactly  what  each  corporation 
should  pay,  or  how  many  corporations  were  liable  for  taxation 
under  the  law.  The  following  figures,  however,  indicate  that 
the  evasion  of  the  tax  is  widespread  throughout  the  county.  An 
examination  of  the  certificates  of  incorporation  filed  in  the 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  61 

county  clerk's  office  discloses  the  fact  that  only  about  one  corpo- 
ration in  ten  claiming  some  town  in  this  county  as  its  principal 
place  of  business,  pays  any  personal  property  tax.  Mne  hundred 
and  eighty-two  certificates  of  incorporation  were  on  file  with  the 
county  clerk.  This  number  includes  those  corporations  that  are 
alive  and  claim  some  town  in  the  county  as  the  principal  place  of 
business.  A  large  number  of  these  corporations  are  doubtless 
practically  dead  for  business  purposes,  and  would  have  little  or 
no  personal  property  subject  to  taxation.  Of  the  982,  the  in- 
vestigator estimated  that  about  400  were  actually  alive  and  carry- 
ing on  business,  and  that  the  remainder,  viz.,  about  582,  though 
legally  alive,  are  practically  dead  so  far  as  liability  for  personal 
property  taxes  is  concerned. 

While  these  figures  cannot  be  relied  upon  to  determine  the 
actual  extent  to  which  corporations  escape  from  the  personal 
property  tax  in  County  A,  still  they  establish  a  strong  presump- 
tion that  the  personal  property  tax  is  evaded  by  a  great  many 
corporations  that  ought  to  pay  it. 

Conclusions  as  to  County  A. — (1)  It  is  fair  to  assume  that 
a  large  number  of  corporations,  through  one  means  pr  another, 
escape  paying  their  fair  share  of  the  personal  property  tax. 

(2)  It  is  definitely  determined  that  the  greatest  inequality 
exists  as  between  towns. 

(3)  It  is  definitely  determined  that  in  most  of  the  towns  of 
this  county  no  attempt  whatever  is  made  to  assess  the  personal 
property  tax  upon  corporations  known  to  be  subject  to  that  tax. 

County  B. —  In  County  B  the  investigator  obtained  a  complete 
list  of  all  corporations  paying  taxes  of  any  kind.  He  did  not 
obtain  a  list  of  all  corporations  claiming  County  B  as  principal 
place  of  business.  The  generalizations  contained  herein  are  based 
upon  the  corporations  listed  upon  the  assessors'  rolls  for  either 
real  or  personal  property  tax.  Of  the  fifty-two  manufacturing 
corporations  listed  upon  the  assessors'  rolls,  forty-four  claim  some 
town  in  County  B  as  principal  place  of  business.  Of  the  forty- 
four  manufacturing  corporations  claiming  County  B  as  prin- 
cipal place  of  business,  only  eight  pay  any  personal  property  tax, 
and  thirty-six  pay  no  personal  property  tax  of  any  kind.  Of  the 


62  STATE  OF  NEW  YORK 

twelve  towns  in  the  county,  ten  contain  manufacturing  corpora- 
tions claiming  those  towns  as  their  principal  places  of  business. 
Of  the  ten  towns,  however,  only  two  assess  personal  property  to 
any  corporation.  Eight  towns  containing  corporations  claiming 
the  town  as  the  principal  place  of  business  fail  to  assess  any 
personal  property  whatever.  The  ratio  of  personal  property  as- 
sessed to  manufacturing  corporations  in  this  county  to  real  prop- 
erty assessed  to  manufacturing  corporations,  is  about  1  to  75. 
In  the  case  of  the  mercantile  corporations  in  County  B,  the  fail- 
ure to  assess  the  personal  property  tax  seems  to  be  less  flagrant 
than  in  the  case  of  the  manufacturing  corporations.  So  far  as  the 
list  could  be  completed,  the  facts  are  as  follows : 

Of  the  twenty-two  mercantile  corporations  claiming  County  B 
as  principal  place  of  business,  nine  pay  a  personal  property  tax 
upon  some  small  amount.  Thirteen  pay  no  personal  property  tax. 
The  ratio  between  the  personal  property  tax  paid  and  the  real 
property  tax  is  about  1  to  13  for  mercantile  corporations.  This 
ratio,  however,  is  misrepresentative  of  the  actual  assessment. 
As  explained  above,  some  of  the  mercantile  corporations  paying 
personal  property  tax  own  no  real  estate,  and  therefore  in  includ- 
ing the  amounts  of  personal  property  tax  paid  by  such  corpora- 
tions we  obtain  a  ratio  of  the  aggregate  personal  property  tax  to 
the  aggregate  real  property  tax,  which  is  higher  than  the  actual 
assessment  of  personal  property  warrants. 

In  summarizing  the  investigation  of  County  B,  the  following 
conclusions  stand  out : 

(1)  In  most  of  the  localities  of  the  county  no  effort  whatever 
is  made  to.  assess  personal  property  of  manufacturing  corporations. 

(2)  Mercantile  corporations,  although  assessed  more  regularly 
than  manufacturing,  are  greatly  under-assessed. 

(3)  The  total  assessment  of  personal  property,  the  situs  of 
which  is  located  in  the  county,  is  ridiculously  low  as  compared 
with  the  total  of  real  property  assessment. 

County  C. —  The  investigation  of  the  assessment  of  the  per- 
sonal property  tax  of  general  business  corporations  in  County  C 
disclosed  the  following  facts : 

Forty  manufacturing  corporations  claiming  some  town  in 
County  C  as  principal  place  of  business  are  assessed  upon  per- 
sonal property  to  the  value  of  $206,800,  and  upon  real  property 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  63 

to  the  value  of  $945,500.  The  total  amount  of  taxes  collected 
from  these  corporations  was  $31,945.45. 

Of  the  forty  manufacturing  corporations  claiming  some  town 
in  County  C  as  the  principal  place  of  business,  twenty-seven  pay 
a  personal  property  tax  and  thirteen  pay  no  personal  property 
tax.  The  ratio  of  the  assessed  valuation  of  corporation  personal 
property  to  the  assessed  valuation  of  corporation  realty  located  in 
the  principal  place  of  business  is  about  1  to  41/2. 

Fifty-five  mercantile  corporations  claim  some  town  in  County 
C  as  their  principal  place  of  business.  Of  the  fifty-five,  all  but 
six  pay  a  personal  property  tax.  Of  the  fifty-five,  only  seventeen 
pay  real  property  tax.  It  is  assumed  that  the  remaining  thirty- 
eight  rent  the  premises  occupied  and  own  no  real  estate.  The 
ratio  of  personalty  assessment  to  realty  assessment  is  about  1  to 
41/9.  In  other  words,  seventeen  corporations  paying  real  estate 
tax  actually  pay  four  and  one-half  times  as  much  tax  as  the  forty- 
nine  pay  upon  the  personalty  tax.  The  ratio  of  personalty  to 
realty  under  these  conditions  is  quite  unreliable. 

Summary  of  County  C. —  In  summarizing  the  results  of  the 
investigation  in  County  C,  the  following  points  stand  out : 

(1)  In  County  C  the  officials  reach  a  very  much  larger  pro- 
portion of  both  the  mercantile  and  manufacturing  corporations 
than  are  reached  in  Counties  A  and  B  described  above. 

(2)  As  between  mercantile  and  manufacturing  corporations, 
no  great  discrepancy  appears  in  County  C. 

It  should  be  added,  however,  that  the  report  on  County  C  is 
limited  to  one  large  manufacturing  city.  Had  this  county  a 
large  number  of  small  manufacturing  towns,  as  in  the  case  of 
Counties  A  and  B,  we  might  expect  to  find  the  same  failure  to 
assess  the  tax  in  the  smaller  towns. 

County  D. —  County  D,  located  in  the  central  part  of  the  State, 
contains  one  of  the  largest  cities  in  the  State,  with  a  great  many 
mercantile  and  manufacturing  corporations.  The  statistics  gath- 
ered cover  all  of  the  manufacturing  and  mercantile  corpora- 
tions listed  on  the  tax  assessors'  books  in  the  principal  localities. 
They  do  not  include  the  corporations  in  six  small  places,  most  of 
which  contain  no  corporations.  That  part  of  the  data  lacking 


64  STATE  OF  NEW  YORK 

would  probably  not  amount  to  over  5  per  cent  of  the  total  num- 
ber of  corporations  doing  business  in  this  county. 

Of  240  manufacturing  corporations  actually  engaged  in  busi- 
ness and  claiming  County  D  as  principal  place  of  business,  167 
paid  personal  property  taxes  in  the  year  1914,  and  73  paid  no 
personal  property  taxes. 

Of  the  150  mercantile  corporations  claiming  County  D  as 
principal  place  of  business,  100  paid  personal  property  taxes  and 
50  paid  no  personal  property  tax. 

From  the  sources  available  to  the  investigator,  it  was  impossi- 
ble to  determine  how  much  personal  property  tax  should  have 
been  paid  under  the  law  by  most  of  the  corporations.  It  is  be- 
lieved, however,  that  not  only  a  considerable  number  of  corpora- 
tions claiming  this  county  as  principal  place  of  business  pay  less 
than  they  ought  to,  but  also  that  a  large  number  of  corporations 
claiming  this  -county  as  principal  place  of  business  paid  no  per- 
sonal property5  tax  whatever. 

The  records  appear  to  be  very  unreliable.  Thirty-four  mercan- 
tile corporations  out  of  160  doing  business  in  one  of  the  cities 
have  no  principal  place  of  business  on  record  in  the  office  of  the 
Secretary  of  State.  Notwithstanding  this  fact,  most  of  them 
are  paying,  a  personal  property  tax  in  County  D. 

The  data  collected  by  the  investigator  in  this  county  is  not  of 
much  value  for  the  purposes  of  determining  the  extent  of  the 
evasion  of  the  personal  property  tax.  It  is  of  value,  however,  as 
evidence  of  the  slipshod  way  in  which  the  records  of  corporations 
are  kept  in  this  State. 

County  E. —  County  E  contains  one  of  the  smaller  but  princi- 
pal manufacturing  cities  of  the  State.  This  county  contains 
four  cities  and  towns  that  include  mercantile  or  manufacturing 
corporations  of  importance.  Of  the  four  localities,  only  one 
assesses  personal  property  tax  to  corporations. 

Of  the  eighteen  mercantile  corporations  claiming  principal 
place  of  business  in  County  E,  eleven  pay  personal  property  tax 
and  seven  do  not. 

Of  the  forty-one  manufacturing  corporations  claiming  County 
E  ,as  principal  place  of  business,  nineteen  pay  personal  property 
tax,  while  twenty-two  pay  no  personal  property  tax. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  65 

From  the  sources  wliich  were  available  to  the  investigator,  it 
was  impossible  to  determine  in  the  case  of  most  of  the  corpora- 
tions whether  or  not  they  were  paying  the  full  amount  for  which 
they  were  liable  under  the  law.  In  the  few  cases  where  the  in- 
vestigator was  able  to  obtain  sufficient  data,  it  was  found  that 
about  one-half  of  them  paid  considerably  less  than  they  should 
have  paid.  So  much  of  the  necessary  data,  however,  was  lacking, 
that  it  is  impossible  to  make  any  very  positive  generalizations. 
The  evidence  brought  to  light,  however,  would  seem  to  indicate 
that  here,  as  in  the  other  counties,  only  a  very  weak  attempt  is 
made  to  assess  the  personal  property  of  corporations. 

Another  rough  method  of  ascertaining  the  inequality  of  assess- 
ing personal  property  as  between  towns  within  the  county  and 
as  between  counties,  is  to  compare  the  ratios  of  personal  property 
assessment  to  real  property  assessment.  This  is  not  an  accurate 
method  of  measuring,  and  probably  in  no  individual  case  does 
the  ratio  between  personal  property  assessment  .and  real  property 
assessment  express  the  correct  ratio  between  personal  property 
legally  subject  to  the  tax  and  the  real  property  assessment.  The 
limitations  of  this  method  are  a3  follows : 

(1)  In  some  localities  there  may  be  a  very  large  percentage 
of  personal  property  listed  for  taxation,  not  because  the  law  is 
rigorously  enforced,  but  because  a  larger  percentage  of  the  prop- 
erty in  the  community  is  in  the  name  of  corporations  claiming 
the  locality  in  question  as  the  principal  place  of  business,  while 
the  corporations  may  have  real  estate  in  the  form  of  plants  situ- 
ated in  surrounding  towns.     In  this  case  the  apparent  high  per- 
centage which  the  personalty  would  bear  to  the  realty  in  the  given 
locality   would  not   indicate  necessarily   a   rigorous   enforcement 
of  the  law.     The  facts  might  be  found  to  be  just  the  opposite. 

(2)  On  the  other  hand,  in  another  locality  where  there  might 
be  a  number  of  plants  owned  by  corporations  claiming  an  out- 
side town  as  principal  place  of  business,  the  ratio  of  personalty  to 
realty    would  necessarily  be  very  low,  for  the  reason  that  the 
realty  of  the  corporations  would  be  assessed  where  located,  while 
the  personalty  located  in  those  towns  could  not  be  assessed  there. 
In  this  case  a  rigorous  assessment  of  the  personal  property  actually 
liable  to  taxation  might  still  show  upon  the  records  a  very  low 


66  STATE  OF  NEW  YORK 

ratio  between  the  personal,  property  assessed  and  the  real  property 
assessed.  Notwithstanding  the  limitations  of  this  method,  we  can 
still  gain  some  very  interesting  information  as  to  the  assessment 
of  personal  property  in  New  York  State. 

In  our  investigation  of  the  five  counties  we  find  that  the  ratio 
of  personal  property  assessed  to  real  property  assessed  varies  all 
the  way  from  1  to  4  to  1  to  75.  In  one  case  within  the  same 
county  we  find  the  ratio  of  personal  property  assessed  to  vary 
almost  as  widely  as  indicated  above.  In  two;  counties  situated  in 
the  same  part  of  the  State,  each  of  which  has  a  fair  proportion 
of  manufacturing,  it  is  found  that  in  one  county  where  most  of 
the  corporations  taxed,  either  for  realty  or  personalty,  claim 
some  town  in  the  county  as  the  principal  place  of  business,  the 
ratio  of  personalty  to  realty  in  one  city  of  the  first  county  is  1  to 
10,  while  the  ratio  for  the  county  as  a  whole  is  about  1  to  25. 
In  the  other  county  in  which  most  of  the  corporations  taxed  upon 
realty  claim  some  town  in  the  county  as  the  principal  place  of 
business,  the  ratio  of  personal  property  assessment  to  real  prop- 
erty assessment  of  manufacturing  corporations  is  only  about  1 
to  75. 

While  it  cannot  be  said,  of  course,  that  the  inequality  in  the 
assessment  of  the  personal  property  tax  is  accurately  represented 
by  the  above  difference  in,  ratios,  it  is  clear  that  after  discounting 
for  all  possible  variations  growing  out  of  reasons  indicated  above, 
still  the  actual  inequality  of  assessment  must  be  very  great.  In 
the  case  of  the  mercantile  corporations  the  actual  inequality  is 
likely  to  be  much  greater  than  is  indicated  by  the  ratio  of  per- 
sonal property  assessment  and  real  property  assessment.  Many 
mercantile  corporations  rent  their  premises  and  are  subject  to 
no  real  property  tax  of  any  kind.  In  those  localities  having  a  large 
proportion  of  their  corporate  investment  in  mercantile  corpora- 
tions, the  ratio  of  personalty  to  realty  ought  to  be  very  high. 

CHAPTER  III 

DECLINE  IN  THE  PERSONAL  PROPERTY  ASSESSMENT  IN  NEW  YORK 

STATE 

Another  telling  piece  of  evidence  as  to  the  failure  of  the  per- 
sonal property  tax  in  New  York  is  found  in  the  records  of  the 
Federal  Census  and  the  annual  reports  of  the  State  Board  of  Tax 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  67 

Commissioners.  These  reports  contain  the  records  of  the  per- 
centage of  the  assessment  of  personal  property  to  the  total  assess- 
ment for  every  county  of  the  State  from  1840  to  1914.  In 
Appendix  A-IV-I  will  be  found  the  details  of  these  percentages. 
We  give  immediately  following  a  brief  analysis  of  this  appendix. 

Appendix  A-IV-I  includes  a  statement  of  the  percentage  of 
the  assessment  of  personal  property  to  the  total  assessment  for 
each  county  of  the  State  for  the  years  1840,  1845,  1850,  1855, 
1860,  1866,  1870,  1875,  1880,  1885,  1890,  1895  and  1900; 
(2)  includes  the  same  data  for  the  years1 1903,  1904,  1905,  1906, 
1907,  1908,  1909,  1910,  1911,  1912,  1913  and  1914. 

This  table  shows  that  there  has  been  a  steady  decrease  in  the 
percentage  of  assessed  personal  property  to  the  total  assessment 
from  1866  down  to  1914.  This  percentage  has  decreased  in 
practically  every  one  of  the  sixty-two  counties.  For  the  State 
as  a  whole  it  has  decreased  from  25.5  per  cent  in  1866  to  3.77 
per  cent  in  1914.  During  this  same  period  the  actual  ratio  of 
total  personal  property  in  the  State  to  total  real  property  has  un- 
doubtedly increased  greatly.  It  is  conceded  by  all  experts  that 
the  total  amount  of  personal  property  probably  exceeds  that  of  real 
property. 

In  examining  this  table  three  questions  may  be  asked : 

(1)  Has  the  percentage  of  personal  property  in  the  State  to 
•eal  property  in  the  State  declined  since  1866  ? 

(2)  Has  the  percentage  of  taxable  personal  property  to  tax- 
ible  real  property  declined  since  1866  ? 

(3)  During    recent   years    the    State   has    segregated    certain 
forms  of  personal  property,  such  as  bank  shares,  mortgages,  vehi- 
cles, etc.,  and  has  devised  new  special  forms  of  taxation  to  cover 
;hese  classes.     Has  the  apparent  decline  in  the  percentage  of  per- 
jonal  property  assessed  to  the  total  assessment  been  due  to  the 
:*act  that  these  special  forms  of  personalty  have  been  taken  out 
Tom  under  the  general  property  tax  ? 

In  reply  to  the  first  question:  It  is  well  known  that  since  1866 
he  ratio  of  personal  property  to  real  property  has  increased 
ffiormously.  This  is  borne  out  by  the  best  statistical  evidence 
hat  we  have.  As  to  what  is  the  exact  ratio  between  the  two  at 
he  present  time  it  is  impossible  to  say.  Various  estimates  have 


68  STATE  OF  NEW  YORK 

been  made,  some  authorities  claiming  that  the  personal  property 
is  now  about  three  and  one-half  times  as  great  as  real  property. 
Practically  all  agree  that  the  total  amount  of  personal  property 
is  now  at  least  equal  to  the  total  amount  of  real  property. 

In  answer  to  the  second  question,  it  also  may  be  said  that  not- 
withstanding all  exemptions  in  the  State  of  New  York  the  per- 
centage of  taxable  personal  property  to  taxable  real  property  has 
increased  to  a  marked  degree  since  1866. 

In  answer  to  the  third  question,  it  must  be  admitted  that  in 
taking  away  from  the  general  property  tax  mortgages,  bank 
shares,  etc.,  the  amount  of  personal  property  actually  liable  to 
taxation  under  the  general  property  tax  has  been  diminished. 

The  table  referred  to,  however,  shows  that  the  ratio  of  assessed 
personal  property  to  total  assessment  steadily  decreased  without 
regard  to  the  years  when  these  special  forms  of  taxation  were 
introduced.  In  other  words,  while  the  segregation  of  these  forms 
of  personalty  did  reduce  for  the  time  being  the  actual  amount 
of  personalty  liable  to  taxation,  it  had  practically  no  effect  upon 
the  percentage  of  personalty  to  reality  that  was  assessed. 

To  summarize:  During  the  last  fifty  years  the  ratio  of  per- 
sonal property  to  real  property  has  greatly  increased,  the  ratio 
of  taxable  personalty  to  taxable  realty  has  greatly  increased, 
and  the  ratio  of  personalty  taxable  under  the  general  property  tax 
to  the  total  assessment  under  the  general  property  tax  has  in- 
creased. The  actual  assessment  on  the  other  hand  has  decreased 
from  25%  per  cent  to  3.77  per  cent. 

CHAPTER  IV 
PERSONAL  PROPERTY  ASSESSMENT  IN  NEW  YORK  CITY 

Taking  up  the  personal  property  assessments  in  rather  more 
detailed  form,  we  will  first  consider  the  situation  in  New  York 
City  from  1907  to  1914,  and  then  take  up  the  personal  property 
assessment  as  we  found  it  in  the  other  cities  and  towns  through- 
out the  State.  The  complete  New  York  City  figures  will  be 
found  in  Appendix  A-V. 

The  tables  show  that 

(1)  There  has  been  a  large  decline  in  the  tentative  assessments 
placed  on  the  roll; 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  69 

(2)  There  has  been  a  sharp  decline  in  the  final  assessment 
retained  on  the  roll; 

(3)  That  there  has  been  a  very  large  increase  in  the  percent 
age  retained,  as  compared  with  the  original  tentative  assessment 

Thus  we  find  that  the  tentative  assessment  in  Manhattan  for 
the  year  1907  was  $2,525,084,325 ;  that  the  final  assessment  was 
$432,654,158,  or  17.1  per  cent  of  the  orginal  assessment,  was 
retained.  In  1914  in  Manhattan  the  tentative  assessment  was 
$622,825,820.  The  final  assessment  was  $287,768,270,  or  46.2 
per  cent  of  the  original  assessment. 

In  Brooklyn,  in  1907,  the  tentative  assessment  amounted  to 
$444,188,425,  and  the  final  assessment  was  $92,866,547,  or  20.9 
3er  cent  of  the  original  assessment.  In  1914  the  tentative  as- 
sessment amounted  to  $117,426,950,  while  the  final  assessment 
amounted  to  $39,296,065,  or  33.4  per  cent  of  the  original  assess 
ment. 

A  similar  situation  was  found  to  exist  in  the  other  boroughs. 

These  figures  would  seem  to  indicate  that  in  spite  of  a  greater 
efficiency  on  the  party  of  the  tax  commissioners,  as  indicated  by 
the  percentage  retained  on  the  tax  rolls,  there  is,  nevertheless,  a 
constantly  decreasing  amount  of  personal  property  actually 
reached  for  taxation. 

CHAPTER  V 
OTHER  CITIES  AND  TOWNS 

In  1911  Mr.  Lawson  Purdy  presented  to  the  New  York  State 
Conference  on  Taxation  the  results  of  his  study  of  the  working 
;>f  the  personal  property  tax  in  cities  and  towns  of  the  State 
Following  the  lines  of  his  investigation,  we  have  made  a  further 
study,  and  for  purposes  of  comparison  have  used  the  identical 
groupings  that  he  used.  Our  statistics,  which,  of  course,  are 
brought  down  to  date,  completely  corroborate  his  findings.  The 
details  of  our  investigation  will  be  found  in  Appendix  A— VI, 
Arranging  all  of  the  fifty-three  cities  of  the  State  outside  the 
City  of  New  York  according  to  the  proportion  which  their  per- 
sonal property  assessment  bears  to  their  total  assessment  — 

In  two  cities  personal  assessment  was  less  than  1  per  cent. 

In  five  cities  personal  assessment  ranged  from  1  to  3  per  cent. 

In  five  cities  personal  assessment  ranged  from  4  to  6  per  cent 


70  STATE  OF  NEW  YORK 

In  ten  cities  personal  assessment  ranged  from  6  to  8  per  cent. 

In  seven  cities  personal  assessment  ranged  from  8  to  11  per 
cent. 

In  twelve  cities  personal  assessment  ranged  from  11  to  13  per 
cent. 

In  five  cities  personal  assessment  ranged  from  13  to  18  per 
cent. 

In  three  cities  personal  assessment  ranged  from  18  to  20  per 
cent. 

In  three  cities  personal  assessment  ranged  from  20  to  21  per 
cent. 

In  one  city  personal  assessment  is  greater  than  21  per  cent. 

The  average  per  cent  of  personal  assessment  to  total  assess- 
ment for  the  fifty-three  cities  is  7.8  per  cent.  It  must  be  re- 
membered that  this  is  the  tentative  assessment.  If  we  compare 
the  assessments  in  some  of  these  cities  with  the  assessments  in 
others,  the  inequalities  of  the  personal  property  tax  become 
plainly  evident.  '  Thus,  taking  Buffalo,  Lackawanna,  Tonawanda, 
Niagara  Falls,  Port  Jervis,  Kensselaer,  Mt.  Vernon,  New 
Eochelle,  Dunkirk  and  Lockport  on  the  one  hand,  and  Hudson, 
Utica,  Geneva  and  Ogdensburg  on  the  other,  we  find  that  the  ten 
cities  first  named  have  a  population  of  592,751.  Assessed  value 
of  real  estate  $485,267,340.  Assessed  value  of  personal  prop- 
erty $30,970,429. 

Four  Cities  — 

Population 114,215 

Eeal  estate $66,554,338 

Personal  property   15,025,612 

The  ten  cities  have  approximately  five  times  the  population  of 
the  four;  nearly  eight  times  the  real  estate  value,  but  only  a 
trifle  more  than  twice  the  value  of  the  personal  property.  Omit 
now  Buffalo,  Dunkirk  and  Lockport,  and  the  remaining  seven 
compare  with  the  group  of  four  as  follows : 

Seven  Cities  — 

Population 133,345 

Real  estate $135,328,812 

Personal  property 3,133,893 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  71 

Four  Cities  — 

Population 114,215 

Keal  estate $66,554,338 

Personal  property    15,025,612 


The  personal  assessment  in  the  seven  cities  is  2.17  per  cent 
of  the  total  assessment,  while  the  personal  assessment  in  the  four 
cities  is  18.54  per  cent  of  the  total  assessment.  The  per  capita 
assessment  of  personal  property  in  the  four  cities  is  $131.55,  and 
in  the  seven  cities  it  averages  $24.14  and  ranges  from  $7.88  in 
Lackawanna  to  $54.48  in  Port  Jervis.  The  per  capita  assess- 
ment of  personal  property  in  the  other  five  is  a  follows: 

New  Kochelle $10  21 

Mt.  Vernon 11  12 

Rensselaer 15  97 

Niagara  Falls 38  02 

Tonawanda  .  52  00 


Dunkirk,  New  Rochelle  and  Lockport,  the  three  of  the  original 
ten  cities  omitted  in  the  last  comparison,  have  a  population  of 
64,058,  a  real  estate  valuation  of  $51,722,154  and  a  personal 
assessment  of  $2,032,070.  Per  capita  personal  assessment, 
$31.72. 

Towns. —  Now  let  us  see  what  the  report  shows  us  as  to  the 
conditions  of  the  towns.  There  are  934  town®,  and  the  assessed 
value  of  their  personal  and  real  property  is  approximately  equal 
to  that  of  the  fifty-three  cities : 

53  Cities  — 

Real  estate $1,585,978,451 

Personal  property 137,505,796 

Total  assessed  value  of  property 1,723,484,247 


934  Towns  — 

Real  estate $1,536,809,551 

Personal  property 84,730,979 

Total  assessed  value  of  property 1,621,540,530 


72  STATE  OF  ISTsw  YORK 

Arranging  the  934  towns  according  to  the  assessed  value  of  per- 
sonal property,  we  have  the  following : 

Number 

Assessed  value  of  personal  property  of  towns 

Assessed  value  of  personal  property  $0.00 77 

Greater  than  '$0.00  but  less  than  $1,000 38 

From  $1,000  to  $5,000 136 

From  $5,000  to  $25,000 , 258 

From  $25,000  to  $100,000 213 

Over  $100,000   212 


934 


Some  of  the  towns  in  the  first  class  are  Green  Island,  West  Al- 
mond, Willing,  Kirkwood,  Binghamton,  Olean,  Arkwright,  etc. 
The  towns  of  Hamilton  and  Washington  counties,  respectively, 
are  relatively  most  numerous  here.  Upon  examining  in  greater 
detail  the  range  of  the  personal  assessments  of  the  towns  in  the 
second  class,  we  have : 

Beekman,  $50;  Thurston,  $100;  Ulster,  $150;  Greenville, 
$200 ;  Richford  and  Hartsville,  $300  each ;  about  10  from  $300 
to  $500  and  about  20  from  $500  to  $600.  Upon  closer  examina- 
tion of  the  last  class,  we  have  the  following  interesting  results : 

About  75  towns  show  personal  assessments  ranging  from 
$100,000  to  $200,000;  about  55  towns  from  $200,000  to 
$500,000;  about  37  towns  from  $500,000  to  $1,000,000;  and  only 
6  towns  of  the  934  show  an  assessment  greater  than  $1,000,000. 
These  honored  six  are:  Elizabethtown,  Batavia,  Hempstead, 
North  Hempstead,  Oyster  Bay,  and  last  but  not  least,  Greenburg 
(Westchester  county),  with  the  greatest  assessment  of  all, 
$3,225,040. 

Assuming  the  rate  to  be  2  per  cent,  509  towns,  or  54  per  cent 
of  the  total  number,  get  anywhere  from  nothing  to  a  maximum 
of  $500  from  the  personal  property  tax;  22  per  cent  get  $2,000 
or  less,  while  but  22%  per  cent  get  over  $2,000. 

In  the  language  of  Mr.  Purdy :    "  What's  the  use  ?  " 


PART  V 
FAILURE  OF  SECTION  12 

INTRODUCTION 

We  shall  divide  the  discussion  of  section  12  into  the  following 
five  divisions:  (1)  a  statement  of  the  law;  (2)  the  impossibility 
of  enforcing  the  law;  (3)  the  results  of  the  Committee's  investi- 
gations into  the  working  of  the  law;  (4)  the  principal  means 
whereby  corporations  are  enabled  to  escape  taxation  upon  their 
personal  property;  (5)  why  corporations  are  impelled  to  evade 
personal  property  tax. 

CHAPTER  I 

The  taxation  of  the  personal  property  of  corporations  for  local 
purposes  is  covered  by  section  12  of  the  Tax  Law,  which  reads  as 
follows : 

"  The  capital  stock  of  every  company  liable  to  taxation, 
except  such  part  of  it  as  shall  have  been  excepted  in  the 
assessment-roll  or  shall  be  exempt  by  law,  together  with  its 
surplus  profits  or  reserve  funds  exceeding  ten  per  centum  of 
its  capital,  after  deducting  the  assessed  value  of  its  real 
estate,  and  all  shares  of  stock  in  other  corporations  actually 
owned 'by  such  company,  which  are  taxable  on  their  capital 
stock  under  the  laws  of  this  State,  shall  be  assessed  at  its 
actual  value." 

As  is  pointed  out  elsewhere,  this  law  has  proved  wholly  unin- 
telligible, not  only  to  the  tax  assessors,  but  to  the  tax  attorneys 
and,  in  part,  to  the  courts  themselves.  It  is,  therefore,  impos- 
sible to  understand  the  law  without  recourse  to  the  court  decisions. 
For  purposes  of  this  report,  little  can  be  gained,  however,  by  a 
discussion  of  these  decisions.  It  is  sufficient  to  state  that  several 
attempts  have  been  made  by  the  various  taxing  boards  to  inter- 
pret the  law  as  modified  by  the  court  decisions  in  such  language 
as  can  be  understood  by  the  average  tax  assessor.  The  State 
Board  of  Tax  Commissioners  has  made  the  following  rule : 

"  From  the  total  assets  of  the  corporation  (including  full 
value  of  real  estate  and  personalty)  and  both  taxable  and 


74  STATE  OF  NEW  YORK 

•te^;?' 

non-taxable  property,  deduct  the  value  of  the  stock  belonging 

to  the  State,  property  exempt,  non-taxable  property  (includ- 
ing shares  of  stock  of  other  corporations,  patent  rights  and 
good  will),  assessed  value  of  the  corporation's  real  estate, 
debts  of  the  corporation,  and  surplus,  if  any,  up  to  ten  per 
centum  of  the  capital." 

The  most  careful  attempt  to  explain  the  law  has  been  made  by 
the  commissioners  of  taxes  and  assessments  of  the  City  of  New 
York.  The  following  blank  schedule  is  used  by  the  department 
of  taxes  and  assessments  of  the  City  of  New  York,  not  for  the  pur- 
poses of  original  assessment  but  for  purposes  of  reassessment  in 
those  cases  where  the  corporation  objects  to  the  original  assess- 
ment. This  interpretation  of  section  12,  as  well  as  the  blank 
form,  have  been  followed  closely  by  several  of  the  large  cities  of 
the  State: 

The  (Please  state  full  name  of  the  corporation),  a  corporation 
organized  under  the  laws  of  the  State  of  New  York,  claiming  to 
be  aggrieved  by  the  assessed  valuation  of  its  property  for  the 
year  1906,  makes  application  by  the  undersigned,  one  of  the 
officers  of  the  said  corporation,  to  have  the  same  revised  and 
corrected. 


Dated,  October  1,  1915. 

STATE  THE  VALUE  OF  THE  FOLLOWING  ITEMS 

Assets 

All  assets  must  be  scheduled,  whether  located  in  the  State  of 
New  York,  or  elsewhere,  including  deposits  in  banks  and  debts 
due  from  nonresidents. 

1.  Heal  estate $ 

2.  Machinery,  plant,  office,  furniture  and  fixtures 

other  than  real  estate. .-...., 

3.  Goods,  wares  and  merchandise 

4.  All  other  tangible  personal  property.      (This 

does  not  include  mortgages  or  credits. ) 

5.  Cash  on  hand  and  on  deposit 

6.  Debts  due  from  solvent  debtors.     (This  includes 

bonds  and  all  credits,  also  "  secured  debts.") 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


75 


7.  Shares  of  stock  of  other  corporations.  .......      $ 

8.  Value  at  which  patent  rights,  copyrights,  trade- 

marks, good  will  and  franchises  were  taken  in 
payment  for  capital  stock 


9.  The  aggregate  of  the  above  assets, 


10.  Property  exempt 
by  law  which  ^ 
includes. 


Deductions 

Except  the  items  numbered  12,  15,  17  and  18,  the  value  of 
every  item  to  be  deducted  must  be  the  sum  at  which  it  is  included 
in  the  above  statement  of  assets. 

U.  S.  Bonds,  K  Y.  State 

and  Municipal  Bonds ...     $ 

N.  Y.  Mortgages  recorded 
on  or  after  July  1,  1906, 
and  mortgages  on  which 
a  registration  tax  has 
been  paid  since  May  13, 
1907,  also  "  secured 
debts."  (This  includes 
only  mortgages  and  "  se- 
cured debts  "  owned  by 

the  corporation)  .......     $ 

Goods  imported  by  above 
corporation  from  for- 
eign countries  on  hand 
in  unbroken  original 
packages $ 

11.  Value    at   which    patent    rights,    copyrights, 

trademarks,   goodwill   and  franchises  were 

taken  in  payment  for  capital  stock.  .......     $ 

12.  So  much  of  the  surplus,  if  any,  as  shall  not 

exceed  ten  per  centum  of  the  par  value  of 

the  shares  of  stock  issued $ 

13.  Shares  of  stock  of  other  corporations  actually 

owned  by  the  above  corporation  which  are 

taxable  upon  their  capital  stock.  .........     $ 


76  STATE  OF  NEW  YORK 

14.  Tangible  personal  property  having  a  perma- 

nent situs  outside  of  this  State,  specifying 
its  nature  and  location.  (This  does  not 
include  bonds,  notes,  evidences  of  debt  of 
any  kind,  currency,  deposits  in  banks,  bills 
receivable,  or  any  other  intangible  prop- 
erty.)   

15.  The  assessed  value  of  the  corporation's  real 

estate  in  this  State,  including  its  special 
franchises.  Give  Section  or  Ward  and  Lot 
Numbers  if  in  the  City  of  New  York 

16.  Eeal  estate  outside  of  this  State,  specifying 

its  location 

17.  Indebtedness    secured    by    the    corporation's 

bond  and  mortgage  on  real  property  to 
which  corporation  now  holds  title 

18.  All  other  indebtedness  of  the  cor- 

poration  not   contracted    or   in 


curred  in  the  purchase  of  non- 
taxable  property  or  securities,  or 
for  the  purpose  of  evading  taxa- 
tion. (The  amount  owing  for 
goods  imported  by  above  corpo- 
ration from  foreign  countries  on 
hand  in  unbroken  packages  and 
the  capital  stock  of  the  corpora- 


Bonds  not 
secured  by 
mortgage  of 
real  estate. 


Notes  .... 
Open  ac- 
counts . 


tion    must    not    be    included. 
Itemized  as  follows : 
19.  The  aggregate  of  the  items  set  down  in  answer 
to  questions  10  to  18  inclusive 


J 


Additional  Information  Required 

a.  Total  par  value  of  capital  stock  issued . $ 

b.  Rate  of  last  dividend Date 

c.  Amount  of  surplus,   if  any,   as  shown  by  the 

books   ...... $ 

d.  Amount    of    indebtedness   for   above    imported 

goods;  this  amount  is  not  included  in  No. 
18  but  is  an  addition  thereto. .          ....          $ 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  77 

Gross  assets  as  shown  by  answer  to  question  9 ....     $ 

Aggregate    of    deductions    from    gross    assets    as 

shown  by  answer  to  question  19 $ 


Subtract  the  deductions  from  the  above  assets.  .  .  . 

Add  "  secured  debts "  upon  which  no  registration 

tax  has  been  paid . 


The  result  is  the  CAPITAL  STOCK  LIABLE  TO  TAX- 
ATION . 


The  principal  office  or  the  place  of  transacting  the  Financial 
Business  of  the  said  corporation  is  situated  in  the  Borough  of 
Manhattan,  in  the  City  of  New  York,  at  !NTo.  .  . street. 

CHAPTER  II 
IMPOSSIBILITY  OF  ENFORCING  SECTION   12. 

In  order  to  understand  how  utterly  impossible  is  the  present 
system  of  taxing  corporations  upon  their  personal  property,  it  is 
important  to  know  wherein  the  law  is  unenforceable. 

In  the  first  place,  it  is  framed  in  such  ambiguous  terms  as  to 
be  thoroughly  obscure  to  the  mind  of  the  average  assessors.  It  has 
been  called  the  most  ambiguous  and  unintelligible  tax  statute  in 
the  United  States.  Without  recourse  to  court  decisions  it  is  im- 
possible to  have  much  idea  as  to  what  the  law  means  and  these 
court  decisions  are  not  known  or  understood  by  the  average  as- 
sessor in  the  State.  Indeed,  there  are  very  few  tax  attorneys 
who  pretend  to  understand  the  law.  .  Moreover,  we  may  go  fur- 
ther iand  say  that  the  courts  themselves  have  frankly  stated  that 
they  were  in  doublt  as  to  what  was  intended  by  the  language  of 
the  law.  The  2Tew  York  Court  of  Appeals,  in  the  case  of  The 
People  ex  rel.  v.  Commissioners  of  Taxes,  95  "N.  Y.  554,  stated 
the  following: 

"  There  is  a  most  extraordinary  confusion  of  ideas  in  the 
section  *  *  *  ."  And  again :  "  Its  interpretation  has 
met  some  difficulty  of  solution  by  the  very  bungling  and 
confused  manner  in  which  the  statutes,  are  worded/7 


78  STATE  OF  NEW  YORK 

In  the  hearings  of  the  Joint  Legislative  Committee  on  Taxa- 
tion, held  in  New  York  City  in  November,  1915,  there  appeared 
many  competent  witnesses  who  testified  as  to  the  confusion  of 
this  law.  In  every  case  the  witnesses  testified  that  the  law  was 
so  ambiguous  as  to  be  utterly  impossible  of  enforcement. 

In  the  second  place,  were  the  law  understandable,  it  would  be 
impossible  for  the  assessors  to  obtain  adequate  information  for  its 
enforcement.  The  sections  27,  28  and  29  of  the  Tax  Law  attempt 
to  provide  means  of  obtaining  this  information.  Section,  27  reads 
as  follows : 

"  The  president  or  other  proper  officer  of  every  moneyed 
or  stock  corporation  deriving  an  income  or  profit  from  its 
capital  or  otherwise  shall,  on  or  before  June  fifteenth,  de- 
liver to  one  of  the  assessors  of  the  tax  district  in  which  the 
company  is  liable  to  be  taxed  and,  if  such  tax  district  is  in 
a  county  embracing  a  portion  of  the  forest  preserve,  to  the 
comptroller  of  the  state,  a  written  statement  specifying: 

"  1.  The  real  property,  if  any,  owned  by  such  company,  the 
tax  district  in  which  the  same  is  situated  and,  unless  a  rail- 
road corporation,  the  sums  actually  paid  therefor. 

"  2.  The  capital  stock  actuaHy  paid  in  and  secured  to  be 
paid  in,  excepting  therefrom  the  sums  paid  for  real  property 
and  the  amount  of  such  capital  stock  held  by  the  State  and 
by  any  incorporated  literary  or  charitable  institution,  and 

u  3.  The  tax  district  in  which  the  principal  office  of  the 
company  is  situated  or  in  case  it  has  no  principal  office,  the 
tax  district  in  which  its  operations  are  carried  on. 

"  Such  statement  shall  be  verified  by  the  officer  making  the 
same  to  the  effect  that  it  is  in  all  respects  just  and  true.  If 
such  statement  is  not  made  within  twenty  days  after  the 
fifteenth  day  of  June,  or  is  insufficient,  evasive  or  defective, 
the  assessors  may  compel  the  corporation  to  make  a  proper 
statement  by  mandamus." 

It  is,  however,  the  unanimous  opinion  of  those  having  to  do 
with  the  enforcement  of  section  12  that  section  27  is  well-nigh 
useless.  While  it  requires  corporations  to  file  certain  definite 
information,  this  is  not  the  information  that  is  needed  for  pur- 
poses of  determining  the  taxable  personalty  of  the  corporations 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  79 

under  section  12.  As  pointed  out  in  another  chapter  of  this 
report,  in  order  to  assess  the  personalty  of  corporations  with  any 
degree  of  intelligence,  it  is  necessary  to  obtain  detailed  informa- 
tion upon  no  less  than  twenty-seven  principal  items  of  the  corpora- 
tion's financial  affairs.  The  assessor  cannot  obtain  information 
in  regard  to  these  items  directly  from  the  corporations,  nor  can 
he  obtain  the  information,  in  most  cases,  from  any  public  source. 
An  examination  of  Moody's  Manual  and  of  Poor's  Manual  dis- 
closes the  fact  that  not  one  corporation  in  ten  publishes  a  balance 
sheet  containing  any  of  the  necessary  information,  and  very  few 
publish  adequate  data. 

In  the  third  place,  many  assessors  have  no  means  of  knowing 
when;  a  corporation  is  taxable  in  their  districts.  Section  29  of  the 
Tax  Law  attempts  to  provide  these  means.  It  reads  as  follows: 

"  Between  the  first  and  fifteenth  days  of  June  in  each 
year  the  county  clerk  in  each  county  of  the  State,  except- 
ing counties  containing  a  city  of  the  second  class  and  coun- 
ties wholly  situate  within  the  corporate  limits  of  a  city,  shall 
prepare  from  the  records  in  his  office  and  mail  to  each  of  the 
town  clerks  in  his  said  county,  a  certified  statement  contain- 
ing the  names  of  every  stock  corporation,  whose  certificate 
of  incorporation  has  been  filed  with  him  since  his  last  pre- 
ceding annual  statements  to  said  several  town  clerks,  whose 
principal  business  office  or  chief  place  of  business  is  desig- 
nated in  its  certificate  of  incorporation  as  being  in  such 
town  or  in  any  village  or  hamlet  therein,  together  with  the 
fact  of  such  designation  and  the  names  and  addresses  of  the 
directors  of  each  such  corporation  so  far  as  said  county  clerk 
can  discover  the  same  from  the  certificate  of  incorporation  or 
from  the  lastest  certificate  of  election  of  directors  of  such 
corporation  filed  in  his  office.  Each  town  clerk  receiving 
such  statement  shall  forthwith  file  the  same  in  his  office  and 
mail  a  notice  of  such  filing  to  each  of  the  assessors  of  his 
town." 

The  Committee's  investigation,  however,  disclosed  the  fact  that 
this  section  is  in  many  localities  a  dead  letter.  "No  compensa- 
tion is  allowed  for  this  work,  with  the  usual  result  that  the  local 
clerks  do  not  carry  out  the  directions  of  the  statute. 


80  STATE  OF  NEW  YORK 

In  the  fourth  place,  even  though  the  law  were  clear  beyond 
mistake,  and  even  though  all  necessary  information  could  be 
obtained  with  the  greatest  facility,  and  even  if  the  assessors  were 
always  informed  as  to  the  local  taxability  of  any  corporation,  it 
would  be  utterly  futile  to  expect  the  average  tax  official  to  assess 
the  personal  property  of  corporations.  This  is  especially  true  of 
manufacturing  corporations.  The  appraisal  of  a  manufacturing 
plant  is  a  highly  technical  job.  It  involves  not  only  wide  train- 
ing in  accounting  and  some  engineering,  but  also  a  special  knowl- 
edge of  the  particular  branch  of  business  to  be  appraised.  Even 
a  rough  estimate  of  the  value  of  a  manufacturing  plant  involves 
a  thorough  understanding  of  principles  of  depreciation  and  ob- 
solescence. When  we  add  to  this  the  difficulty  of  assessing  large 
stocks  of  raw  materials  and  of  goods  in  the  process  of  manufac- 
ture, as  well  as  finished  products,  it  is  seen  how  utterly  hopeless 
it  is  to  expect  an  untrained  local  assessor  even  to  approximate 
the  value  of  such  property.  The  comparative  ease  with  which 
the  average  corporation  can  keep  from  the  average  tax  assessor 
the  knowledge  necessary  to  a  correct  assessment  is  illustrated  by 
the  difficulty  which  the  Committee  had  in  investigating  some 
2,500  corporations  liable  to  taxation  in  the  State  of  New  York. 
The  Committee  had  much  greater  facilities  for  obtaining  correct 
information  than  the  average  assessor.  In  attempting  to  deter- 
mine how  much  personal  property  should  be  assessed  to  these 
corporations  the  Committee  had  access  to  Moody's  Manual  of 
Corporations,  to  Poor's  Manual,  and  to  several  other  sources.  It 
employed  statisticians  and  accountants  who  were  trained  to  do 
just  this  sort  of  work.  In  the  end,  however,  it  had  the  greatest 
difficulty  in  obtaining  the  necessary  information,  and  was  able  to 
obtain  sufficient  data  concerning  only  about  one  hundred  of  these 
corporations.  Even  after  carefully  sifting  the  doubtful  cases,  it 
was  still  doubtful  whether  the  Committee  was  able  to  obtain 
anything  more  than  a  very  rough  estimate  of  the  amount  of  per- 
sonalty taxable  to  these  corporations  under  the  law.  In  order 
to  do  full  justice  to  corporations  they  were  given  the  benefit 
of  the  doubt  in  every  case.  While  this  is  the  fair  thins;  to  do 
for  purposes  of  investigation,  it  would  not  be  the  fair  thing  to 
mittee  is  convinced  that  it  is  a  comparatively  easy  thing  for  most 
do  for  purposes  of  taxation.  In  view  of  its  experience,  the  Com- 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  81 

corporations  to  keep  from  the  assessor  the  data  necessary  to  any- 
thing like  a  complete  assessment.  In  this  respect  the  New  York 
assessor  is  in  a  situation  in  no  way  different  from  that  of  the  other 
states  of  the  Union  that  still  adhere  to  the  outworn,  mediaeval 
system  of  local  assessment  of  corporate  personalty.  The  utter 
fatuity  of  this  system  is  borne  out  by  overwhelming  evidence  in 
every  state  in  the  Union.  Wherever  anything  like  scientific  ap- 
praisal and  assessment  of  corporation  property  has  been  accom- 
plished, it  has  been  necessary  to  break  away  from  the  local  assess- 
ment. In  concluding  this  paragraph,  it  is  sufficient  to  say  that 
every  tax  authority  in  the  United  States  agrees  that  it  is  utterly 
hopeless  and  impossible  to  assess  under  a  corporation  tax  law 
such  as  that  now  prescribed  by  section  12  of  the  New  York  law. 

CHAPTER  III 
THE  COMMITTEE'S  INVESTIGATION  OF  SECTION  12 

In  order  to  obtain  a  measure  of  the  practical  workings  of  sec- 
tion 12,  the  Committee  undertook  several  investigations,  the 
results  of  which  are  given  below. 

Investigation  of  Some  2,500  Corporations. —  The  names  of 
some  2,500  general  business  corporations  actually  doing  business 
in  the  State  of  New  York  were  obtained.  This  list  was  largely 
made  up  of  domestic  corporations,  and  included  mercantile,  manu- 
facturing and  other  general  business  corporations.  It  did  not 
in  any  case  include  public  service  corporations,  moneyed  corpo- 
rations or  philanthropic  and  non-stock  corporations.  The  list 
was  selected  entirely  at  random.  Some  of  the  names  were  ob- 
tained by  investigators,  who  went  through  the  city  directories, 
telephone  directories,  etc.,  of  various  counties.  Some  of  the 
names  were  obtained  by  an  assistant  who  went  through  Moody's 
Manual,  selecting  domestic  corporations,  without  any  knowledge 
as  to  the  purpose  for  which  the  names  of  the  corporations  were 
to  be  used. 

In  ascertaining  whether  or  not  the  corporations  in  question 
were  paying  all  of  the  personal  property  tax  on  which  they  were 


82  STATE  OF  NEW  YORK 

liable  under  section  12,  the  following  routine  of  procedure  was 
followed : 

(1)  An  attempt  was  made  to  obtain  from  Moody's  Manual  or 
Poor's  Manual  a  copy  of  the  general  balance  sheet  of  the  cor- 
poration,   with   such   other   detail   as   to   capitalization,   bonded 
indebtedness,  etc.,  as  was  necessary  to  determine  what  the  cor- 
poration should  pay. 

(2)  From  the  Secretary  of  State's  office,  or  from  the  county 
clerk's  office,   information  was  obtained   as  to  what  town  was 
claimed  by  the  corporation  as  the  principal  place  of  business. 

(3)  An  inquiry  was  sent  to  the  local  taxing  officer  as  to  the 
amount  of  personal  property  tax  paid  by  the  given  corporation. 

Of  the  some  2,500  corporations,  it  was  possible  to  locate  the 
names  of  only  about  300  in  the  corporation  manuals.  Of  the 
300,  it  was  necessary  after  a  study  of  the  data  recorded  to  dis- 
card the  names  of  about  200  corporations.  In  the  case  of  the 
latter,  either  the  balance  sheet  was  wholly  missing  or  the  report 
lacked  some  of  the  details  that  were  absolutely  essential,  even  to 
a  rough  estimate  of  the  amount  of  personal  property  which  these 
corporations  should  pay  under  section  12.  Of  the  remaining  100 
names  of  corporations  listed  in  the  corporation  manuals,  a  care- 
ful study  was  made  of  their  balance  sheets,  and  an  attempt  was 
made  to  estimate  the  amount  of  personal  property  which  each 
should  pay  according  to  law. 

An  examination  of  the  New  York  City  blank  form  given  above, 
which  contains  some  19  principal  headings  and  several  sub- 
headings, will  indicate  with  what  difficulty  the  Committee  was 
able  to  determine  the  amount  of  personal  property  tax  which 
should  be  paid  by  any  given  corporation.  In  order  to  estimate 
with  approximate  accuracy  the  amount  of  personal  property  sub- 
ject to  taxation,  it  is  necessary  to  have  quite  correct  informa- 
tion in  regard  to  items  10,  11,  12,  13  and  14.  From  the 
balance  sheets  and  other  data  obtained  from  the  corporation  man- 
uals, it  was  found  very  difficult  to  determine  in  any  given  case 
the  amount  which  should  be  set  opposite  items  Nos.  10,  12,  13 
and  14.  Wherever  in  any  case  doubt  existed,  the  benefit  of  the 
doubt  was  given  to  the  corporation.  From  the  financial  state- 
ments of  the  corporations  it  was  often  impossible  to  determine 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  83 

what  percentage  of  securities  held  by  the  corporation  should  be 
allowed  under  item  10.  Wherever  securities  were  so  listed,  a 
deduction  was  allowed  of  the  total  amount. 

In  regard  to  item  No.  11,  it  was  always  impossible  to  deter- 
mine what  percentage  of  the  value  of  patent  rights,  copyrights, 
trade  mark,  good  will,  etc.,  listed  in  the  general  balance  sheets 
of  the  corporation,  was  taken  in  payment  for  capital  stock. 
Although  the  value  of  patent  rights,  good  will,  etc.,  in  some  cor- 
porations amounted  to  as  high  as  two-thirds  of  their  total  assets, 
they  were  in  every  case  deducted  in  whole  from  the  taxable  assets. 

In  regard  to  item  13,  it  was  impossible  to  determine  from 
the  financial  statements  obtained  what  percentage  of  the  shares 
of  stock  of  other  corporations  actually  owned  by  the  corporation 
were  taxable  upon  their  capital  stock.  In  every  case  the  corpora- 
tion was  given  the  benefit  of  the  doubt,  and  it  was  assumed  that 
the  total  amount  of  shares  of  stock  so  held  had  been  taxed  else- 
where and  were  therefore  exempted. 

Without  fairly  accurate  knowledge  of  the  information  called 
for  under  item  14,  it  would  be  impossible  to  approximate  the 
amount  of  personal  property  in  any  given  case  which  should  be 
assessed  under  section  12. 

It  was  impossible  for  the  Committee  to  obtain  access  to  any 
source  that  revealed  this  information,  and  it  therefore  resorted 
to  the  following  four  methods  of  determining  the  amount  of  tan- 
gible personal  property  having  a  permanent  situs  in  the  State: 

(1)  Where  details  were  given  as  to  the  total  capacity  or  out- 
put of  manufacturing  plants  of  a  given  corporation,  in  addition 
to  the  details  of  the  capacity  or  output  of  each  plant,  it  was 
assumed  that  the  tangible  personal  property  located  within  the 
State  would  bear  about  the  same  ratio  to  the  total  tangible  per- 
sonal property  as  the  capacity  or  output  of  the  plants  within  the 
State  bore  to  the  total  capacity  or  output  of  all  the  plants. 

(2)  Where  the  details  of  the  acreage  of  the  various  plants 
were  stated,  it  was  assumed  that  the  amount  of  tangible  personal 
property  within  the  State  would  bear  about  the  same  ratio  to  the 
total  tangible  personal  property  as  the  acreage  of  plants  within 
the  State  bore  to  the  total  acreage  of  plants. 

(3)  In  the  case  of  mercantile  corporations,  information  was 
obtained  from  the  Comptroller's  office  as  to  the  proportion  of 


84  STATE  OF  NEW  YORK 

total  assets  subject  to  taxation  under  section  182.  This  propor- 
tion of  assets  was  assumed  to  represent  roughly  the  proportion 
of  tangible  personalty  situated  within  the  State. 

(4)  In  the  case  of  other  corporations  whose  business  was 
known  to  be  done  largely  in  the  State  of  New  York,  an  arbitrary 
but  conservative  estimate  was  made  of  the  proportion  of  business 
that  was  done  in  this  State ;  and  in  the  case  of  such  corporations, 
it  was  assumed  that  the  percentage  of  tangible  personalty  situa- 
ted in  New  York  would  be  approximately  the  same  as  the  per- 
centage of  total  business  carried  on  in  New  York.  The  results 
of  this  investigation  will  be  found  in  the  tabulation  given  in 
Appendix  D-I. 

We  give  below  a  list  of  twenty-five  corporations  taken  from 
Appendix  D-I.  This  group  is  not  selected  but  includes  the  names 
of  those  corporations  about  which  we  were  able  to  obtain  data 
sufficiently  complete.  The  list  is  as  follows : 


Amount 

Amount  of  actual 

of  taxable 

assessment  under 

Designation  of  Corporation 

personalty 

section  12 

A2    

$4,  000,  000 

$100,  000 

A4    

2,  100,  000 

1,800 

A5    

8,  541,  000 

750,  000 

B3    

352,  877 

0 

B9    

1,634,913 

0 

C2    

350,  524 

0 

C3    

3,759.361 

25.  000 

Co     

85,  573 

150,  000 

El    

332,  108 

0 

E2    

5,758,831 

0 

E3    

1,  000,  000 

0 

F2    

1,  033,  691 

0 

G2    

42,  850,  000 

1,  100,  000 

G3    

1,066,714 

0 

G6    

497,  000 

8,000 

G7    

887,112 

0 

G8    

78,  356 

0 

LI     

3,512,752 

0 

Ml     

9,  608,  055 

1,200,000 

Nl    

1,  027,  488 

0 

N9    

445,865 

0 

S2    

301,105 

5.000 

S3    

998.  906 

0 

Wl    

300,  502 

0 

Total   .    , $90,  522,  733  $3,  339,  800 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  85 

The  summary  of  this  list  is  as  follows: 

Total  number  of  corporations  listed 24 

Total  taxable  personalty $90,522,733 

Aggregate  actual  assessment 3,339,800 

Percentage  of  taxable  personalty  actually  paid.  ...  3.46% 
Percentage  of  taxable  personalty  legally  liable  but 

evaded   9G .  54% 

Further  comment  on  the  above  is  unnecessary. 

Important  as  these  results  are  in  disclosing  the  failure  of  the 
personal  property  tax  of  corporations,  they  do  not  disclose  the 
full  significance  of  that  failure.  In  the  first  place,  corporations 
are  permitted  through  the  peculiar  features  of  the  New  York 
Tax  Law  to  escape  by  thoroughly  legal  means  from  paying  taxes 
upon  an  important  portion  of  their  personalty  that  yields  large 
returns.  This  investigation,  however,  attempted  to  determine  not 
what  corporations  should  pay  fairly,  but  only  what  they  should 
pay  under  the  generous  New  York  Tax  Law.  The  results  dis- 
closed the  fact  that  even  after  reducing,  through  the  peculiarities 
of  the  law,  the  amount  of  taxable  personalty  to  as  low  as  one-fifth 
or  less  of  the  actual  personalty  owned,  the  larger  part  of  this  one- 
fifth  is  usually  evaded.  Furthermore,  reference  to  the  other  in- 
vestigations of  the  Committee,  carried  on  by  means  of  voluntary 
returns  from  general  business  corporations,  shows  that  the  volun- 
tary reports  of  the  corporations  disclosed  the  failure  of  the  law 
to  a  greater  degree  than  the  original  investigation  of  the  Com- 
mittee. 

In  order  to  understand,  not  only  to  what  extent  the  law  is 
evaded,  but  also  how  the  result  is  very  unequal  even  where  the 
tax  law  is  enforced  we  may  examine  the  facts  in  regard  to  a  few 
of  these  corporations. 

Corporation  A-4: 

Has  an  authorized  capitalization  of  $10,000,000  and  capital 
stock  outstanding  of  $3,000,000.  No  bonded  debt. 

This  corporation  has  its  actual  place  of  business  and  its  only 
factory  located  on  Long  Island,  but  claims  as  its  principal  place  of 
business  a  little  town  up  in  the  northwestern  part  of  the  State. 
Its  total  assets  are  $3,651,524. 


86  STATE  OF  NEW  YORK 

A  careful  analysis  of  its  balance  sheet  results  in  the  conclusion 
that  the  minimum  amount  of  personal  property,  after  making  all 
possible  deductions  according  to  the  law,  is  $742,630.  This  cor- 
poration actually  paid  upon  an  assessed  value  of  $1,800.  In  this 
case  the  estimate  was  less  than  one-fourth  of  1  per  cent  of  the 
minimum  amount  taxable  under  the  law. 

Corporation  A-5: 

A  large  manufacturing  corporation  located  in  the  centre  of  the 
State,  claiming  as  its  principal  place  of  business  the  city  in  which 
its  largest  plants  are  located.  It  is  capitalized  for  $50,000,000 
and  has  a  bonded  debt  of  approximately  $7,729,000.  Its  total 
assets  amount  to  over  $73,000,000.  After  deducting  all  possible 
deductions  and  giving  the  corporation  the  benefit  of  the  doubt  in 
every  case,  there  is  left  $3,655,291  of  taxable  personal  property. 
A  reasonable  estimate  of  this  corporation's  taxable  personalty 
would  be  several  times  this  amount,  but  in  order  to  give  the  cor- 
poration the  benefit  of  every  doubt  the  figure  given  was  selected. 
This  corporation  pays  personal  property  tax  upon  the  estimate  of 
$750,000,  or  an  amount  which  is  only  about  20  per  cent  of  the 
lowest  possible  amount  subject  to  section  12. 

Corporation  A-8: 

A  paper  manufacturing  company  with  all  of  its  mills  located  in 
New  York.  Capital  stock  $350,000.  No  bonded  indebtedness. 
Pays  dividends  upon  its  6  per  cent  preferred  regularly  and  20 
per  cent  upon  the  common  stock.  Pays  no  personal  property  tax. 

Corporation  B-l : 

An  important  corporation  manufacturing  optical  goods.  Cap- 
ital stock,  $600,000.  No  bonded  indebtedness.  Pays  a  personal 
property  tax  upon  assessment  of  $175,000.  Impossible  to  obtain 
sufficient  data  to  determine  whether  corporation  pays  tax  upon  its 
total  taxable  personal  property.  However,  this  company  would 
appear  to  be  one  of  the  exceptions,  in  that  it  probably  pays  all 
that  it  ought  to. 

Corporation  B-5: 

A  large  shoe  manufacturing  company.  Capital  stock  $9,900,- 
000.  Notes  payable  $2,336,000.  Surplus  $285,739.  Total  as- 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  87 

sets  over  $12,000,000.  Good  will,  etc.,  about  $5,000,000.  Under 
present  law  apparently  no  taxable  personalty.  Here  is  a  con- 
spicuous case  illustrating  the  inadequacy  of  the  present  property 
tax.  A  large  corporation  of  great  wealth  with  personalty  to  the 
extent  of  $5,000,000  that  would  be  taxable  in  other  states.  In 
New  York,  however,  the  corporation  can  escape  without  paying 
any  personal  property  tax,  although  it  enjoys  a  large  income. 

Corporation  B-7: 

A  manufacturing  corporation  located  in  the  northwestern  part 
of  the  State.  Capital  stock,  $1,150,000.  No  bonded  debt.  Divi- 
dends on  preferred  paid  regularly.  Dividends  on  common  not 
reported.  This  corporation  pays  upon  a  total  personal  property 
assessment  of  $25,000.  From  the  corporation  manuals  and  other 
material  at  the  service  of  the  Committee  sufficient  details  cannot 
be  obtained  to  determine  how  large  the  personal  property,  assess- 
ment should  have  been  made. 

Corporation  B-8 : 

A  large  furnace  company  with  capital  stock  of  $1,160,000.  No 
bonded  debt.  Preferred  dividends  are  paid  regularly,  and  com- 
mon dividends  are  also  paid  but  not  made  public.  Net  earnings 
average  nearly  20  per  cent  of  the  total  capitalization.  Corporation 
paid  taxes  upon  personal  property  assessed  at  $50,000.  Here  is 
another  case  of  a  large  corporation  making  unusually  large  divi- 
dends with  a  personal  property  assessment  that  is  insignificant  as 
compared  with  its  total  assets  and  capitalization. 

Corporation  B-10: 

A  by-products  company.  Capital  stock  $4,000,000,  bonded 
indebtedness  $2,000,000,  and  total  assets  of  $6,738,000.  Under 
the  present  law  allowing  deduction  of  bonded  debt  from  person- 
alty the  corporation  has  no  personal  property  liable  to  taxation. 
Were  the  New  York  Law  similar  to  that  of  most  states,  there 
would  be  a  large  item  of  personalty  liable  to  taxation. 


88  STATE  OF  NEW  YOK£ 

CHAPTER  IV 

INVESTIGATION   OF   THE   COMMITTEE   BY   MEANS   OF   VOLUNTARY 
RETURNS  OF  GENERAL  BUSINESS  CORPORATIONS 

Another  plan  of  investigating  the  working  of  section  12  fol- 
lowed by  the  Committee  was  by  means  of  voluntary  returns  from 
general  business  corporations.  For  the  purpose  of  this  investi- 
gation the  Commitee  obtained  the  names  of  some  300  representa- 
tive general  business  corporations  and  requested  them  to  fill  out  a 
blank  form  prepared  by  the  Committee. 

Of  the  300  to  whom  this  blank  was  sent,  only  a  small  per- 
centage made  returns,  and  in  many  cases  the  returns  were  incom- 
plete. The  Committee  discarded  the  too  incomplete  returns  and 
based  its  conclusions  upon  only  those  complete  or  nearly  complete. 
In  this  connection  it  should  be  stated  that  in  every  case  the  Com- 
mittee accepted  the  returns  of  the  corporation  without  question. 
While,  for  purposes  of  drawing  conclusions,  it  was  unfortunate 
that  a  large  number  of  returns  could  not  be  obtained,  yet  it  is 
believed  that  the  data  received  does  not  underestimate  the  failure 
of  section  12.  It  is  only  reasonable  to  assume  that  those  corpora- 
tions voluntarily  returning  a  statement  of  their  taxable  base 
would  be  made  up  of  the  least  offenders  under  the  law.  In  as- 
suming, therefore,  that  the  data  is  typical  of  the  situation  we  are 
giving  the  corporations  the  benefit  of  the  doubt. 

In  examining  the  data  returned,  it  is  nothing  short  of  surpris- 
ing to  find  how  completely  the  personal  property  tax  of  corpora- 
tions has  broken  down.  An  examination  of  Appendix  D-IV, 
which  contains  a  tabulation  of  the  facts  gathered  from  these  re- 
turns, discloses  two  facts:  that  a  large  number  of  corporations 
escape  from  paying  taxes  upon  a  large  part  of  their  personal 
property  through  the  bonded  debt  means  or  the  good  will  means. 
But  entirely  apart  from  this,  it  will  be  noted  that  most  of  the 
corporations  there  listed  also  escape  from  paying  taxes,  if  not 
entirely,  at  least  upon  a  large  part  of  their  taxable  personal  prop- 
erty. The  summary  of  the  results  brought  out  by  this  computa- 
tion is  as  follows : 

Of  the  fifteen  corporations  included  in  the  list,  six  do  not  pay 
any  personal  property  tax  whatever.  These  six,  however,  have  a 
total  capital  stock  outstanding  of  $19,719,200,  and,  according  to 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  89 

their  own  statements,  have  a  total  capital  stock  liable  to  taxation 
of  $4,962,003.19.  The  remaining  nine  corporations,  acec/rding 
to  their  own  statements,  have  an  aggregate  capital  stock  liable  to 
taxation  of  $3,019,851.75,  and  pay  on  an  actual  assessment  of 
$1,303,405.50.  For  the  whole  group  the  percentage  of  capital 
stock  liable  to  taxation  actually  assessed  varies  from  O1  per  cent  to 
121.2  per  cent. 

An  examination  of  the  last  column  of  the  tabulation  in  the  ap- 
pendix will  explain  in  part  why  many  of  these  corporations  own- 
ing millions  of  personal  property  are  actually  liable  for  such  a 
small  percentage  under  the  Tax  Law.  While  the  column  entitled 
" Actual  assessment,  percentage  of  taxable  personalty  "  will  not 
explain  why  the  system  fails  so  completely,  it  shows  unmistakably 
what  an  almost  complete  farce  is  this  personal  property  tax  of 
corporations.  The  following  typical  cases  serve  to  illustrate  this 
point  further: 

Take,  for  example,  Corporation  SS-2,  with  an  outstanding 
capital  of  $10,000,000,  paying  dividends  to  the  amount  of 
$600,000  a  year,  or  at  the  rate  of  6  per  cent.  This  corporation 
is  not  assessed  for  a  dollar's  worth  of  personal  property  and  pays 
no  taxes. 

Corporation  AA-1 : 

This  corporation  has  outstanding  capital  of  $900,000.  Total 
assets,  $1,326.617.98.  Good  will,  $50-0,000.  Total  deductions 
allowed  under  section  12,  $837,124.58.  Personal  property  liable 
to  taxation,  $489,493.40.  This  corporation  pays  no  personal 
property  tax. 

Corporation  AA-2: 

This  corporation  is  a  manufacturer  of  engines  and  boilers.  It 
has  a  total  outstanding  stock  of  $700,000.  Total  assets,  $741,622. 
Total  deductions  allowed  under  the  law,  $143,005.  Personal 
property  liable  to  taxation  under  section  12,  $598,617.  The  cor- 
poration was  assessed  for  $250,650  personal  property.  This 
assessment  was  equal  to  less  than  one-half  of  the  taxable  personal 
property.  It  is,  however,  unusual  for  corporations  to  be  assessed 
up  to  as  much  as  one-half  of  their  taxable  personalty.  This  case 
constitutes  an  exception  to  the  general  rule. 


90  STATE  OF  NEW  YORK 

Corporation  BB-1: 

This  corporation  has  total  assets  of  $2,249,655.05  and  a  capital 
stock  issued  of  $500,000,  The  total  deductions  permitted  under 
the  law  are  $1,521,205.49.  The  amount  of  taxable  personalty  is 
$628,449.56.  This  corporation  pays  no  personal  property  tax. 

Corporation  BB-2: 

This  corporation  has  an  issued  capital  stock  of  $7,000,000, 
a  surplus  of  over  $2,500,000,  and  annual  net  earnings  varying 
from  $860,000  to  $1,700,000.  It  pays  upon  personal  property 
assessed  at  $393,220.  This  corporation  has  an  annual  interest 
charge  of  over  $500,000  upon  bonded  indebtedness,  or  in  other 
words  has  a  bonded  -indebtedness  of  approximately  $9,000,000. 
Here  is  another  case  where  a  corporation  with  a  large  amount  of 
personal  property  is  allowed  to  escape  with  a  very  small  assess- 
ment as  the  result  of  the  peculiarity  in  the  New  York  law  which 
permits  deduction  of  total  indebtedness  from  personal  property. 

Corporation  CC-1 : 

This  corporation  has  capital  stock  of  $150,000  and  total  assets 
of  $609,346.  It  pays  interest  upon  bonded  indebtedness  of 
$6,315,  or  in  other  words  has  a  bonded  indebtedness  of  an  average 
of  $500,000.  It  pays  a  personal  property  tax  of  $374,  which  at 
a  2  per  cent  rate  of  taxation  represents  an  assessment  of  $18,700. 
After  allowing  for  all  legal  deductions  it  still  has  taxable  per- 
sonalty of  $58,204.  It  pays,  therefore,  a  tax  upon  less  than 
one-third  of  its  taxable  personalty.  Were  it  not  for  the  bonded 
indebtedness  the  taxable  personalty  would  be  several  times  as 
great. 

Corporation  GG-1: 

This  corporation  is  capitalized  for  $383,600,  and  has  total 
assets  of  $1,035,298.52.  It  has  taxable  personal  property  of 
$695,945,  and  pays  a  personal  property  tax  of  $106.07.  It 
actually  paid  upon  an  assessment  of  $4,925.28.  This  assess- 
ment was  less  than  1  per  cent  of  its  actual  taxable  personal 
property. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  91 

Corporation  HH-1  : 

This  corporation  has  capital  stock  of  $800,000  and  assets  of 
$757,763.  It  has  taxable  personalty  to  the  value  uf  $325,954, 
and  was  assessed  upon  only  $45,000.  This  is  a  clear  case  of 
under  assessment,  but  this  assessment  represents  a  much  higher 
proportion  of  actual  taxable  personalty  than  the  ordinary  assess- 
ment. 

Corporation  LL-1  : 

This  corporation  has  a  capital  stock  of  $1,600,000  and  total 
assets  of  nearly  $2,400,000.  After  making  all  deductions  per- 
mitted under  the  law  it  still  has  taxable  personal  property  to  the 
value  of  over  $1,000,000.  It  pays  no  personal  property  tax  of 
any  kind. 

CHAPTER  V 

INVESTIGATION  OF  THE  WORKING  OF  SECTION   12  THROUGH  THE 
MEANS  OF  VOLUNTARY  RETURNS  OF  CORPORATIONS 

For  the  data  used  in  this  investigation,  the  Committee  is  in- 
debted to  the  Associated  Manufacturers  and  Merchants  Associa- 
tion of  New  York.  At  the  request  of  the  Committee  the  associa- 
tion undertook  to  gather  from  all  of  the  important  manufacturers 
within  the  State  the  necessary  data.  In  this  way  the  Committee 
received  sworn  statements  from  thirty-four  of  the  more  important 
business  corporations  in  the  State.  In  appendix  D-Y  will  be  found 
a  tabulation  of  the  more  important  data  obtained  from  these 
statements.  It  is  not  necessary  to  go  into  much  detail  in  explain- 
ing this  data.  It  speaks  for  itself.  The  important  point  to  note 
is,  that  in  so  far  as  it  bears  upon  the  failure  of  section  12,  it  coin- 
cides very  closely  with  the  results  of  the  other  investigations  of 
the  Committee.  Moreover,  it  bears  out  completely  the  conclusions 
of  the  Committee  that  have  been  based  upon  the  other  investiga- 
tions. An  examination  of  a  few  of  these  returns  will  serve  to 
confirm  our  statements. 

For  example,  corporation  'No.  252,  according  to  its  own  state- 
ment, is  liable  under  section  12  for  an  assessment  of  $57,022.20, 
but  was  actually  assessed  for  only  $1,780. 

Corporation  No.  424  was  actually  liable,  according  to  its  own 
statement,  for  a  personal  property  assessment  of  $785,138.11.  It 
was  assessed  upon  $200,043. 


92  STATE  OF  NEW  YORK 

A  still  more  flagrant  case  is  No.  444.  This  corporation,  accord- 
ing to  its  own  statement,  should  have  paid  taxes  upon  an  assess- 
ment of  $1,232,502.60,  and  it  was  actually  assessed  upon  only 
$59,427. 

Corporation  No.  467  was  liable  to  assessment  for  $2,071,- 
665.76,  and  was  not  assessed  for  personal  property. 

Corporation  No.  449  was  liable  to  assessment  for  over  a  mil- 
lion dollars,  and  paid  no  personal  property  tax. 

Corporation  No.  546  was  liable  to  assessment  upon  $1,830,860, 
and  paid  on  $15,096.50. 

On  the  other  hand,  there  are  several  cases  in  which  corpora- 
tions have  paid  all  that  they  were  liable  for.  The  table  illustrates, 
therefore,  not  only  that  these  corporations  as  a  group  are  ridicu- 
lously under-assessed,  but  that  there  is  an  utter  lack  of  uniformity 
as  to  the  percentage  at  which  the  various  corporations  are  as- 
sessed, some  of  them  being  assessed  from  nothing  to  ten  per  cent 
of  their  taxable  personalty,  while  others  are  assessed  for  one  hun- 
dred per  cent. 

CHAPTER  VI 

HOW  CORPORATIONS  ESCAPE  THE  PERSONAL  PROPERTY  TAX  IN 

NEW  YORK  STATE 

In  the  attempt  to  construct  a  scientific  and  at  the  same  time  a 
thoroughly  practical  method  of  reaching  that  great  body  of  cor- 
porate wealth  that  now  escapes  taxation,  the  first  step  is  to  take 
notice  of  the  means  whereby  the  present  system  permits  this 
escape.  Under  the  New  York  Tax  Law  there  are  no  less  than  five 
important  ways  through  which  corporations  may  escape  their  fair 
share  of  the  tax  burden.  If  any  system  for  successfully  reaching 
corporate  wealth  is  to  be  devised,  it  must  take  into  account  all 
these  methods  of  evasion.  Some  of  these  methods  may  be  classed 
as  illegal,  but  the  means  by  which  the  larger  part  of  corporate 
personalty  escapes  its  fair  share  may  be  called  thoroughly  legal. 
In  other  words,  the  present  evasion  is  due  not  to  the  disposition  of 
the  corporations  to  evade  the  legal  requirements  of  the  statute, 
but  to  their  effort  to  evade  through  the  legal  channels  a  system  of 
taxation  which,  if  actually  enforced,  would  impose  great  hardship 
upon  them.  This  possibility  of  evasion  is  not  limited  to  the 
present  system,  but  is  to  be  found  to  a  more  or  less  extent  with 
some  other  systems  that  have  been  proposed.  For  purposes  of  con- 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  93 

structive  reform  it  is  therefore  of  utmost  importance  that  we  con- 
sider the  means  whereby  corporations  may  escape  their  fair  bur- 
den of  personal  property  taxation. 

In  the  first  place,  the  corporation  may  escape  part  of  its  per- 
sonal property  taxation  by  taking  advantage  of  that  feature  of  the 
New  York  Tax  Law  which  permits  a  corporation  to  select  as  its 
principal  place  of  business  any  locality  in  the  State.  This  locality 
may  be  where  it  transacts  an  important  part  of  its  business,  or  it 
may  be  a  little  obscure  place,  far  removed  from  the  site  of  any  of 
its  business.  Owing  to  another  peculiar  feature  of  the  New  York 
Law  which  makes  the  situs  of  all  personal  property  for  purposes 
of  taxation  the  principal  place  of  business,  the  corporation  may 
limit  the  power  of  taxing  its  personalty  to  the  one  small  locality 
which  it  selects  as  the  legal  principal  place  of  business.  It  may 
have  large  stocks  of  goods  in  the  principal  cities  of  the  State  and 
enjoy  fire  protection,  police  protection,  etc.,  without  distributing 
one  cent  to  the  maintenance  of  the  government  of  those  cities.  It 
may  have  large  amount  of  tangible  personal  property  located  in 
cities  where  the  cost  of  government  is  very  high,  and  by  trans- 
ferring its  principal  place  of  business  to  some  little  obscure  town 
where  the  expenses  of  government  are  very  low,  it  may  escape 
with  a  very  low  rate  of  taxation.  More  than  that,  it  may,  and 
very  often  docs,  escape  without  paying  any  personal  property  tax 
in  any  place. 

In  our  investigation  of  the  assessment  of  the  personal  property 
of  several  hundred  corporations,  we  found  a  number  of  cases  in 
which  corporations  claimed  particular  towns  as  principal  place  of 
business,  while  the  tax  officers  were  ignorant  of  the  fact  and  had 
never  assessed  them. 

For  the  purpose  of  evading  their  fair  share  in  the  localities 
where  they  actually  carry  on  their  business  and  have  their  tangi- 
ble assets  located,  corporations  have  been  accustomed  to  select  cer- 
tain localities.  These  localities  are  notorious  either  for  the  low 
tax  rate  or  for  their  willingness  to  assess  the  corporations  only  at 
a  nominal  amount.  Through  this  means  many  cities  have  been 
deprived  of  a  large  amount  of  their  legitimate  tax  base. 

The  extent  of  this  evil  is  well  borne  out  both  by  the  testimony 
of  the  witnesses  before  the  hearings  of  the  Joint  Legislature  Com- 
mittee on  Taxation  and  by  numerous  investigations.  The  results 


94  STATE  OF  NEW  YORK 

of  the  investigation  are  set  forth  in  the  appendix  of  this  report. 
Appendix  D-II  and  D-III  bear  upon  this  point. 

Appendix  D-II  contains  a  list  of  corporations  in  a  single  town 
that  was  presented  to  the  New  York  Constitutional  Convention  of 
1915  from  data  furnished  by  the  office  of  the  State  Board  of  Tax 
Commissioners.  The  summary  of  this  table  is  as  follows: 

1.  Number  of  corporations 51 

2.  Aggregate  capital  stock $33,257,370 

3.  Aggregate  assessment ,  60,700 

4.  Percentage  of  aggregate  assessment  to  aggre- 

gate capital  stock 0 . 18% 

or  less  than  one-fifth  of  one  per  cent. 

While  the  percentage  of  assessment  to  capital  stock  of  any 
particular  corporation  does  not  necessarily  reflect  the  degree  of 
evasion  with  accuracy,  yet  in  the  aggregate  the  comparison  is 
highly  significant.  The  most  interesting  fact  is  that  very  few,  if 
indeed  any,  of  these  corporations,  do  any  business  in  the  town  of 
Esopus. 

Appendix  D-III  contains  a  list  of  corporations  that  claim  the 
town  of  Washington,  county  of  Dutchess,  as  the  principal  place 
of  business.  The  summary  of  this  table  is  as  follows : 

1.  Number  of  corporations 43 

2.  Aggregate  of  capital  stock $52,302,000 

3.  Aggregate  assessment 477,500 

4.  Aggregate  assessment  as  per  cent  of  aggre- 

gate capital  stock 0.91% 

or  less  than  one  per  cent. 

The  conclusions  from  this  table  coincide  at  every  point  with 
those  of  every  other  piece  of  evidence  presented  to  the  Committee, 
namely,  that  corporations  select  as  "  principal  place  of  business  " 
towns  in  which  they  actually  do  no  business  for  the  purpose  of 
evading  the  personal  property  tax. 

The  testimony  of  the  various  tax  officials,  including  the  Chair- 
man of  the  State  Board  of  Tax  Commissioners,  is  completely  cor- 
roborative of  the  Committee's  investigation.  Chairman  Saxe  tes- 
tified that  this  evil  was  of  widespread  importance.  He  stated 
that  conditions  similar  to  those  of  Esopus  and  Dutchess  county 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  95 

"  obtains  in  a  great  many  of  the  so-called  desirable  taxing  dis- 
tricts, where  these  corporations  locate  their  principal  place  of 
business.  You  will  find  in  that  Esopus  list,  so-called,  a  large 
number  of  New  York  city  corporations,  paying  no  tax  here,  and 
paying  a  very  nominal  tax  up  there,  for  the  privilege  of  escaping 
taxation  down  here." 

Mr.  Joseph  C.  Wilson,  President  of  the  Board  of  Assessors 
of  the  City  of  Rochester,  testified  that  the  City  of  Rochester  loses 
millions  of  dollars  of  taxable  base  through  the  custom  of  corpora- 
tions to  transfer  their  so-called  principal  place  of  business.  He 
testified  that  many  large  corporations  having  their  plants  and 
tangible  personalty  located  in  the  large  cities,  transfer  their  so- 
called  principal  place  of  business  to  one  of  the  smaller  towns  for 
the  reason  that  the  towns  do  not  assess  them,  as  high  in  many 
cases  as  the  cities.  Furthermore,  he  testified  that  "  the  town 
assessors  do  not  know  that  they  [corporations]  are  located  there 
and  they  escape  without  any  tax  whatever." 

At  the  New  York  hearings,  one  of  the  former  city  comptrollers 
testified  to  the  same  effect.  He  testified  that  there  are  hundreds 
of  corporations  incorporated  up-state  for  the  purpose  of  evading 
taxes  which  should  be  paid  in  New  York  City.  Furthermore, 
he  said,  "  I  am  one  of  them  —  I  am  entitled  to  do  it  under  the 
law,  but  it  is  not  fair." 

As  to  availing  himself  of  the  opportunity  to  escape  taxation, 
he  said :  "  I  have  two  offices  in  Esopus  —  a  tin  box  in  each  — 
I  know  I  do  it  every  chance  I  get,  and  I  suppose  every  other  man 
does  the  same  thing." 

A  second  reason  why  corporations  escape  their  personal  pro- 
perty tax  is  found  in  the  failure  of  the  local  assessors  to  assess. 
As  has  been  pointed  out  in  the  previous  chapter,  this  is  partly 
due  to  the  ambiguity  of  the  law  and  partly  due  to  the  fact  that 
the  law  provides  no  method  for  successfully  checking  up  under- 
assessments. The  important  point  to  be  considered  here,  how- 
ever, is  the  wide  extent  to  which  corporations  escape  taxation 
through  local  favoritism.  This  is  due  not  necessarily  to  the  dis- 
honesty of  any  particular  group  of  tax  assessors,  but  rather  to  the 
fact  that  the  system  of  locally  assessing  corporate  property  is  one 
which  proves  too  great  a  test  for  human  nature,  and  this  statement 
is  as  true  of  every  other  state  in  the  Union  as  it  is  of  New  York 


06  STATE  OF  NEW  YORK 

State.  For  thus  locally  favoring  the  corporations  the  assessor  is 
not  to  be  blamed.  In  so  doing  he  undoubtedly  in  most  cases 
acts  in  harmony  with  the  wishes  of  the  community.  The  com- 
munities are  eager  to  obtain  factories  and  other  corporate  invest- 
ment in  their  localities,  and  know  that  low  rates  will  furnish  an 
inducement  to  a  corporation  to  locate  in  their  town.  This  evil 
is  inherent  in  any  system  of  taxation  that  provides  for  the  local 
assessment  of  corporate  personal  property,  and  it  can  be  rectified 
only  by  changing  the  system  completely. 

Legal  Means  of  Escaping  Taxation.  The  most  important 
means  by  which  corporations  escape  taxation  are  to  be  found  in 
two  recognized  institutions  of  the  New  York  tax  system.  To 
this  extent  the  evasion  is  accomplished  by  thoroughly  legal  means. 
These  means  are  through  New  York's  peculiar  system  of  deduc- 
ting indebtedness  and  of  exempting,  through  omission,  good  will. 

In  a  large  number  of  states  of  the  Union,  corporations  are  per- 
mitted to  deduct  debts  from  credits,  but  in  New  York  State  cor- 
porations are  permitted  to  deduct  total  indebtedness  from  per- 
sonal property.  As  a  result  of  this  provision  it  is  possible  for 
corporations  to  create  a  large  bonded  indebtedness,  and  thus  to 
escape  entirely  from  taxation  upon  personal  property.  Especially 
in  the  cases  of  those  corporations  having  large  amounts  of  valu- 
able personal  property,  these  means  of  evading  the  personal  prop- 
erty tax  have  been  used. 

The  extent  to  which  this  evasion  is  accomplished  was  brought 
out  by  the  Committee's  investigation  into  the  relation  between 
the  amount  of  bonded  indebtedness  and  outstanding  capital  stock 
of  a  large  number  of  important  New  York  corporations.  In  the 
appendix  will  be  found  two  tables  illustrating  this  statement. 

Appendix  D-YI  contains  a  tabulation  of  the  bonded  indebted- 
ness and  capital  stock  outstanding  of  36  representative  domestic 
manufacturing  corporations  that  were  selected  at  random.  Appen- 
dix D-VI-2  contains  a  list  of  36  domestic  mercantile  and  miscel- 
laneous corporations  that  were  selected  for  the  purpose  of  illus- 
trating the  large  bonded  indebtedness.  Appendix  D-VI-1  may  be 
said  to  be  representative  of  manufacturing  corporations  as  a 
group.  Appendix  D-VI  cannot  be  said  to  be  representative  in- 
asmuch as  those  corporations  were  selected  that  had  the  largest 
bonded  indebtedness.  However,  botv  tables  illustrate  what  a 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  97 

large  portion  of  the  possible  personal  property  tax  base  of  cor- 
porations is  lost  to  New  York  State  through  these  provisions. 
The  amount  of  taxable  base  so  lost  runs  up  into  many  hundreds 
of  million  dollars  annually.  This  one  feature  alone  deprives 
the  ]STew  York  personal  property  tax  on  corporations  of  all 
semblance  of  justice.  The  following  is  a  summary  of 
Appendix  D-VI-1 : 

Number  of  corporations 36 

Aggregate  bonded  debt $161,697,896 

Aggregate  capital  stock  outstanding 311,952,286 

Bonded  debt  as  per  cent,  of  capital  stock 51.8% 

The  following  is  a  summary  of  Appendix  D-VI-2 : 

Number  of  corporations 38 

Aggregate  bonded  debt $118,069,207 

Aggregate  capital  stock  outstanding 143,191,753 

Bonded  debt  as  per  cent,  of  capital  stock 82 . 4-% 


The  question  naturally  arises  why  the  framers  of  the  Tax  Law 
have  enacted  a  provision  containing  such  a  large  loophole.  The 
question  was  answered  by  Professor  Seligman  at  the  hearings  of 
the  Joint  Legislative  Committee,  as  follows: 

"  The  whole  system  of  personal  property  taxes  arose  be- 
for  there  were  corporations;  and  when  corporations  de- 
veloped, about  the  middle  of  the  century,  they  first  began 
on  a  large  scale  in  this  State,  they  [legislators]  simply 
slapped  that  section  [debt-deduction  section]  because  they 
thought  it  would  solve  the  problem,  and  they  did  not  realize 
that  the  situation  was  an  entirely  new  one.  We  therefore 
go  along  in  the  old  way,  being  one  of  the  very  few  American 
states  which  still  retain  their  primitive  method  of  assessing 
corporations  locally." 

The  fallacy  of  the  deduction  of  bonded  indebtedness  from 
personal  property  is  evident  to  anyone  who  is  familiar  with 
modern  corporation  finance.  Legally,  to  be  sure,  funded  debt  is 

iebt,  but  economically  it  is  nothing  of  the  kind.     Economically 


|> 


98  STATE  OF  NEW  YORK 

it  is  a  means  of  obtaining  capital.  This  fact  is  recognized  by 
all  authorities  upon  corporation  finance  and  is  recognized  in  the 
accounting.  Bonded  indebtedness  is  but  a  part  of  the  capitaliza- 
tion of  the  corporation,  and  in  the  average  corporation  accounting 
system,  is  included  with  capital  stock  under  the  general  term  of 
capitalization.  A  bonded  debt  is  not  looked  upon  by  the  cor- 
poration as  a  handicap,  but  as  an  advantage.  While  it  is 
legally  a  debt  of  the  corporation  and  occupies  the  position  of  a 
fixed  charge,  it  is  economically  a  part  of  the  capitalization  which 
provides  the  revenues  of  the  corporation.  Just  as  the  capital 
stock,  through  a  fiction  of  accounting,  is  a  liability  of  the  corpo- 
ration, so  the  bonded  investment,  through  a  legal  fiction,  is  called 
a  debt  of  the  company.  The  corporation,  however,  looks  upon 
the  debt  not  as  a  disadvantage,  but  as  an  advantage,  and  the  ques- 
tion which  faces  the  corporation  often  is  not  whether  there  should 
be  a  debt,  but  as  to  the  proper  proportions  of  the  capital  which 
should  be  obtained  through  means  of  bonds  and  stock.  It  is  clear, 
therefore,  that  no  sound  reason  exists  for  the  deduction  of  bonded 
indebtedness  from  personal  property.  The  bonded  indebtedness 
instead  of  decreasing  the  earning  power  of  the  corporation,  in- 
creases it,  and  thus,  instead  of  decreasing  the  ability  of  the  corpo- 
ration to  pay  taxes,  increases  the  ability.  This  fact  has  been 
recognized  by  the  best  tax  commissions  that  have  investigated 
the  taxation  of  personal  property  of  corporations  in  other  states, 
and  is  also  recognized  by  authorities  on  corporation  finance. 

Another  important  intangible  element  that  represents  large 
earning  power  and  therefore  large  ability  to  pay,  is  often  grouped 
in  the  corporation  balance  sheet  under  the  designation  "  good 
will."  This  item  entirely  escapes  from  taxation  under  the  un- 
usual section  of  the  New  York  Tax  Law  pertaining  to  personal 
property.  In  most  states  good  will  is  not  specifically  designated 
for  purposes  of  taxation,  but  is,  however,  taxable  by  implication 
under  the  general  term  "  personal  property."  New  York  State, 
however,  departs  from  the  usual  custom.  In  designating  what 
personal  property  is  taxable,  New  York  State  enumerates  those 
items  that  are  included  in  the  term  "  personal  property."  Prob- 
ably through  oversight  the  term  "  good  will "  was  omitted  from 
this  enumeration.  The  courts,  however,  have  decided  that  good 
will  is  not  taxable  under  the  New  York  Tax  Law. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  99 

The  unreasonableness  of  this  omission  comes  out  clearly  when 
we  consider  what  the  element  of  good  will  stands  for  in  the  modern 
corporation.  The  relation  of  good  will  to  earning  power,  and 
therefore  to  taxpaying  ability,  is  very  clear.  In  many  corpora- 
tions it  represents  nothing  more  than  the  capitalization  of  that 
part  of  the  earning  power  which  is  not  derived  from  tangible 
assets.  To  the  extent  that  this  is  incorporated  in  patents  and 
copyrights,  it  is  of  course  not  taxable  legally  under  the  general 
property  tax.  Economically,  however,  it  represents  taxpaying 
ability. 

But  entirely  apart  from  that  portion  of  the  good  will  which 
represents  copyrights  and  patents,  the  remainder,  especially  in 
mercantile  corporations,  represents,  in  many  cases,  a  large  amount 
of  the  real  earning  power  of  the  corporation.  Indeed,  it  is  cus- 
tomary in  many  corporations,  after  apportioning  to  their  tangible 
assets  a  part  of  their  income  at  a  reasonable  rate  of  interest,  to 
capitalize  the  remainder  of  the  income  and  designate  it  as  good 
will.  In  some  corporations  it  is  becoming  the  custom  to  write  off 
good  will.  This  does  not,  however,  destroy  the  earning  capacity, 
but  only  covers  it  up  in  a  different  form.  In  either  case,  this 
intangible  asset  represents  the  best  taxpaying  ability  of  the 
corporation. 

This  system  deals  with  various  types  of  corporations  very  un- 
fairly. Wherever  the  law  is  enforced,  those  corporations,  the 
nature  of  the  business  of  which  requires  a  heavy  investment  in 
tangible  personalty,  are  subject  to  a  very  heavy  tax.  Those  cor- 
porations, on  the  other  hand,  the  nature  of  whose  business  re- 
quires a  very  small  investment  in  tangible  assets,  escape  with 
almost  no  tax. 

For  purposes  of  illustrating  this,  the  Committee  compiled  a 
selected  list  of  important  domestic  corporations  having  large  earn- 
ing capacity  as  compared  with  their  tangible  assets.  This  tabula- 
tion is  included  in  Appendix  D-VIII,  and  contains  a  statement 
of  the  value  of  the  capital  stock  outstanding,  the  total  assets,  and 
the  value  of  the  good  will.  The  value  of  the  good  will  was  taken 
from  the  balance  sheets  of  the  corporations,  as  published  in 
Mjoody's  or  Poor's  Manual.  In  several  cases  it  was  found  im- 
possible to  determine  precisely  what  proportion  of  the  total  assets 


100  STATE  OF  NEW  YOKK 

was  made  up  of  good  will.  In  making  up  their  balance  sheets 
some  corporations  have  the  habit  of  grouping  one  or  more  items 
under  the  term  good  will.  Very  often  patents,  trade-marks,  etc., 
are  grouped  under  this  heading.  In  come  of  these  cases  therefore 
it  cannot  be  said  that  the  total  amount  set  opposite  the  term  good 
will  represents  personalty  that  could  be  reached  for  purposes  of 
taxation  under  any  general  property  system.  In  most  cases,  how- 
ever, it  is  represented  largely  by  intangible  personalty  that  could 
be  reached  were  the  New  York  law  altered  so  as  to  include  good 
will  within  taxable  personalty.  And  in  almost  every  case  it  repre- 
sents a  just  source  of  taxation.  Reference  to  Appendix  D-VII 
will  show  that  the  35  corporations  there  listed  have  an  aggregate 
good  will  valued  at  $287,651,371,  while  the  total  aggregate  assets 
of  these  corporations  is  only  $497,327,898,  and  the  capital  stock 
is  $405,569,070.  The  aggregate  good  will  is  70.9  per  cent  of  the 
capital  stock  outstanding  and  57.8  per  cent  of  the  total  assets. 
A  few  examples  will  serve  for  illustration: 

(1)  The  F.  W.  Company,  possessing  total  assets  of  about  $74,- 
000,000,  is  absolutely  untaxable  in  New  York  to  the  extent  of 
$50,000,000.     And  yet  this  $50,000,000  represents  little  more 
than  the  capitalization,  at  a  reasonable  rate  of  return,  of  the  very 
large  earnings   of  one  of   the  most  prosperous  of   New  York 
corporations. 

(2)  Another  example  is  that  of  X.  Y.  Z.,  with  a  good  will 
valued   at   $15,000,000    out   of   a   total    asset   of   a   little   over 
$21,000,000. 

(3)  Another  prominent  case  is  that  of  P.  C.  &  Co.,  with  total 
assets  of  less  than  $22,000,000,  $18,000,000  of  which  is  listed  as 
good  will. 

In  conclusion,  it  should  be  pointed  out  that  this  intangible 
wealth  can  best  be  reached  not  by  a  general  property  tax,  nor, 
indeed,  by  a  classified  property  tax  (for  a  certain  portion  of  it 
cannot  be  reached  by  either),  but  by  a  tax  levied  according  to 
earning  capacity  or  net  income. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  101 


CHAPTER  VH 

WHY  CORPORATIONS  ARE  IMPELLED  TO  EVADE  PERSONAL  PROP- 
ERTY TAX 

In  another  portion  of  this  report  it  has  been  pointed  out  that 
a  large  proportion  of  the  corporations  doing  business  in  the  State 
of  J^ew  York  succeed  in  one  way  or  another  in  evading  entirely 
or  almost  entirely  their  personal  property  tax.  In  some  cases 
this  is  done  by  making  an  arrangement  with  the  local  assessor 
whereby  the  corporation  agrees  to  choose  the  domicile  of  that  local 
assessor  as  ita  principal  place  of  business,  providing  the  corpora- 
tion shall  be  greatly  under  assessed.  In  another  case  it  is  ac- 
complished by  secrecy  and  deceit.  In  many  cases  it  is  accom- 
plished through  a  technicality  of  the  law,  and  in  a  large  number 
of  cases  it  is  accomplishel  by  legally  evading  the  intent  of  the  law 
through  the  means  of  large  bonded  indebtedness. 

The  purpose  of  this  paragraph  is  not  to  dwell  upon  the  evasions 
of  the  law,  but  to  point  out  the  fact  that  only  through  evasion  can 
the  corporations  avoid  much  injustice  in  matters  of  taxation.  The 
present  personal  property  tax  law  as  applied  to  corporations  is 
one  of  the  most  illogical,  unenforced  and  unjust  laws  that  has 
ever  been  put  upon  the  American  statute  books.  Were  it  honestly 
enforced  many  corporations  would  either  be  forced  to  leave  the 
State  or  be  forced  into  bankruptcy.  This  is  especially  true  in  the 
case  of  many  manufacturing  and  mercantile  corporations.  In  the 
case  of  these  types  of  corporations,  the  nature  of  the  business  of 
which  requires  the  carrying  of  a  large  stock  of  raw  material  and 
partly  finished  products,  or  a  large  stock  of  finished  products,  the 
enforcement  of  the  personal  property  tax  would  result  in  not  only 
great  injustice  to  the  corporation  but  in  great  injury  to  the  State 
itself.  The  present  personal  property  tax  of  twenty  mills  is 
equivalent  to  an  income  tax  of  from  25  to  40  per  cent,  upon 
that  proportion  of  the  assets  embodied  in  personal  property. 
Were  this  tax  enforced  those  corporations  whose  assets  were  largely 
made  up  not  of  fixed  capital  but  of  current  assets  would  be  stimu- 
lated to  remove  from  the  State  as  soon  as  possible.  Those  corpora- 
tions whose  assets  were  largely  of  specialized  and  fixed  character 
and  thus  lacked  a  ready  market  would  be  forced  to  remain  within 
the  State,  but  in  remaining  within  the  State  they  would  be  forced 


STATE  OF  NEW  YORK 


to  compete  upon  unequal  terms  with  corporations  in  other  states. 
It  is  needless  to  say  that  new  capital  would  not  invest  in  the 
State  of  New  York  under  such  unfavorable  conditions. 

Another  most  unfair  aspect  of  the  present  personal  property  tax 
law  is  that  when  enforced  it  bears  with  great  inequity  upon  those 
corporations  that  are  struggling  to  keep  upon  their  feet.  A  per- 
sonal property  tax  which  amounts  to  40  per  cent,  of  the  income 
may  be  paid  by  a  corporation  enjoying  a,  fairly  large  income,  but 
a  tax  of  this  size  when  imposed  upon  a  corporation  that  is  strug- 
gling to  get  upon  its  feet  would  mean  in  some  cases  ruin.  In  the 
latter  case  it  would  result  not  in  taking  40  per  cent,  of  income, 
because  there  would  be  no  income,  but  the  taking  of  capital  value. 

In  looking  up  the  financial  condition  of  a  large  number  of 
corporations  in  the  State  of  New  York  for  the  purpose  of  ascer- 
taining whether  or  not  corporations  were  paying  the  personal 
property  tax  according  to  the  present  tax  law,  the  Committee  found 
a  number  of  corporations  that  were  approaching  dangerously  near 
to  bankruptcy.  In  some  of  these  cases  the  corporations  were 
forced  to  carry  a  large  stock  of  tangible  personalty.  Had  a  gen- 
eral property  tax  been  rigidly  enforced  upon  the  later,  and  had 
the  corporations  been  unable  to  evade  the  law  according  to  some  of 
the  well-known  methods  in  this  State,  some  of  these  particular  cor- 
porations might  have  been  forced  to  the  wall. 

In  considering,  therefore,  the  extent  to  which  the  corporations 
are  enabled  to,  and  do,  evade  the  personal  property  tax,  it  should 
always  be  borne  in  mind  that  the  corporations  are  evading  a  most 
unjust  tax,  and  moreover  it  should  be  borne  in  mind  that  the  State 
has  imposed  upon  the  corporations  in  many  cases  the  necessity 
either  of  evading  this  tax,  or  moving  from  the  State,  or  going  into 
bankruptcy.  The  unescapable  conclusion  is  —  not  that  the  tax 
should  be  rigidly  enforced  —  but  that  it  is  all  wrong,  out  of  date, 
palpably  unjust,  and  should  be  supplanted  by  a  fair  system. 


PART  VI 
TAXATION  OF  FOREIGN  CORPORATIONS 

In  no  other  state  of  the  Union  do  foreign  corporations  consti- 
tute such  a  large  proportion  of  the  legitimate  tax  base  as  in  New 
York  State,  and  jet  it  is  doubtful  if  in  any  other  state  of  the 
Union  these  corporations  bear  such  a  small  proportion  of  their 
fair  tax  burden.  The  problem  of  the  foreign  corporation  is  of 
such  large  importance  that  the  subject  calls  for  a  thorough  ex- 
amination. We  shall  deal  with  this  subject  under  the  following 
four  heads : 

(1)  The  law  regarding  the  taxation  of  the  personal  property 
of  foreign  corporations. 

(2)  The  failure  of  the  law. 

(3)  Why  foreign  corporations  in  New  York  should  contribute 
substantially  to  both  State  and  local  government. 

(4)  Foreign  corporations  as  a  tax  base  —  present  yield  and 
potential  yield. 

THE  LAW  REGARDING  THE  TAXATION  OF  PERSONAL  PROPERTY  OF 
FOREIGN  CORPORATIONS 

Section  7,  subdivision  1,  of  the  New  York  Tax  Law,  which 
applies  to  foreign  corporations,  reads  as  follows: 

"  Nonresidents  of  the  State  doing  business  in  the  State, 
either  as  principals  or  partners,  shall  be  taxed  on  the  capital 
invested  in  such  business,  as  personal  property,  at  the  place 
where  such  business  is  carried  on,  to  the  same  extent  as  if 
they  were  residents  of  the  State." 

The  intrastate  situs  of  foreign  corporations,  for  purposes  of 
assessment  for  taxation,  is  only  at  the  principal  place  of  business. 
(Bay  State  Shoe  and  LeatJi.  Co.  v.  McLean,  80  N.  Y.  254.)  The 
principal  place  of  business  may  not  necessarily  be  where  the  cor- 
poration carries  on  its  actual  business  or  the  larger  amount  of  its 
business,  but  at  the  place  named  in  its  certificate  filed  under  sec- 
tion 16  of  the  General  Corporation  Law  as  its  principal  place 
within  the  State.  (Armstrong  Cork  Co.  v.  Barker,  157  N.  Y. 
159.) 


104  STATE  OF  NEW  YOEK 

In  the  matter  of  the  taxation  of  foreign  corporations,  as  in  so 
many  other  sections  of  the  Tax  Law  dealing  with  corporations, 
the  exact  meaning  of  the  law  is  uncertain.  It  is  impossible  to 
know  what  property  of  foreign  corporations  is  taxable  and  under 
what  conditions  such  property  is  taxable,  without  referring  to  the 
court  decisions.  These  decisions  have  cleared  up  the  matter  to 
some  extent,  but  still  leave  considerable  doubt  as  to  several  im- 
portant points.  In  1915  the  Department  of  Taxes  and  Assess- 
ments of  the  City  of  New  York  issued  a  pamphlet  entitled 
"  Memorandum  of  Examinations  on  Applications  for  Correction 
of  Personal  Assessments."  This  pamphlet  contains  the  best  short 
summary  of  the  essential. points  affecting  the  taxation  of  foreign 
corporations  that  has_  appeard.  The  following  brief  summary 
consists  largely  of  extracts  from  this  pamphlet. 

Recurring  to  section  7,  subdivision  1,  of  the  Tax  Law,  the 
question  arises  as  to  when  capital  is  invested  in  New  York,  and 
as  to  when  foreign  corporations  may  be  said  to  be  doing  business 
within  the  State.  In  regard  to  the  question  as  to  when  capital 
is  invested,  the  following  may  be  said.  If  a,  nonresident  actually 
has  capital  invested  in  business  in  the  State  of  New  York,  the 
amount  of  such  capital  is  to  be  determined  by  the  same  rules  as 
would  apply  to  the  resident  if  the  resident  owned  no  property 
other  than  such  capital  and  had  no  debts  other  than  debts  arising 
out  of  the  conduct  of  such  business.  To  determine  the  amount 
of  the  assessment,  the  aggregate  of  taxable  personal  property  must 
be  ascertained,  and  from  that  amount  must  be  deducted  such  debts 
as  were  incurred  in  the  purchase  of  such  taxable  personal  property 
and  such  debts  as  affect  and  lessen  the  value  of  the  thing  subject  to 
taxation,  viz.,  the  capital  invested  here.  (Heeler- Jones- Jew  ell 
Milling  Co.  v.  Barker,  147  N.  Y.  31.) 

Section  6  of  the  Tax  Law  reads  as  follows : 

"All  real  and  personal  property  subject  to  taxation  shall  be 
assessed  at  the  full  value  thereof,  provided,  however,  that  the 
owner  of  personal  property  shall  be  allowed  a  deduction  from 
the  full  value  of  his  taxable  personal  property  to  the  ex- 
tent of  the  just  debts  owing  by  him  but  no  such  deduction 
shall  be  allowed  by  reason  of  the  indebtedness  of  the  owner 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  105 

contracted  or  incurred  in  the  purchase  of  nontaxable  prop- 
erty or  securities  owned  by  him  or  held  for  his  benefit,  nor 
for  or  on  account  of  any  indirect  liability  as  surety, 
guarantor,  indorser  or  otherwise,  nor  for  or  on  account  of 
any  debt  or  liability  contracted  or  incurred  for  the  purpose 
of  evading  taxation." 

The  prohibition  of  this  section  against  the  deduction  of  debts 
incurred  for  nontaxable  property  or  securities  is  applicable  to  the 
debts  of  a  nonresident. 

In  regard  to  what  constitutes  "  doing  business  in  the  State " 
the  following  may  be  said.  If  a  nonresident  corporation  is  to  be 
subjected  to  taxation  on  its  capital  invested  in  business  in  this 
State,  the  business  must  be  continuous  and  permanent  and  not 
transitory.  No  general  rule  can  be  given  that  will  make  it  pos- 
sible to  determine  in  every  case  when  a  business  is  a  permanent 
one  and  when  it  is  temporary.  It  is  necessary  to  examine  the 
nature  of  the  business  as  well  as  the  intention  of  the  nonresident. 
The  following  summary  is  quoted  verbatim  from  the  pamphlet 
referred  to: 

"  The  decisions  of  the  courts  in  particular  cases  have  been 
somewhat  in  conflict,  but  in  recent  years  they  have  limited 
the  character  of  a  business  which  may  be  regarded  as  perma- 
nent and  continuous. 

"  The  law  was  enacted  in  1855,  and  shortly  thereafter  in 
1861  the  case  of  Parker  Mills  v.  Commissioners  of  Taxes 
was  decided.  (23  1ST.  Y.  242.)  An  extract  from  the  opinion 
in  this  case  recites  the  facts  as  follows : 

"  '  It  had  a  depot  and  agent  in  the  city  of  ISTew  York,  to 
whom  it  transmitted  nails  for  sale.  Its  only  business  within 
this  State  consisted  in  making  such  sales,  the  proceeds  of 
which  were  remitted  at  once  to  the  corporation  in  Massa- 
chusetts, and  where  sales  were  upon  credit,  the  securities 
received  were  sent  to  the  corporation  for  collection.  It  ap- 
peared by  the  testimony  of  the  agent  that  the  sales  amounted 
to  about  $300,000,  and  that  the  value  of  the  nails  which  he 
then  had  in  store  was  $10,00'0.7 

"  Nothing  is  said  in  this  opinion  as  to  whethei  or  not  the 


106  STATE  OF  NEW  YORK 

Parker  Mills  had  a  bank  account  in  New  York.  It  is  certain 
that  they  carried  a  large  stock  of  goods  continuously  and  per- 
manently in  the  city  of  New  York.  Nevertheless,  it  was 
held  that  the  Parker  Mills  did  not  have  capital  invested  in 
business  in  the  State  of  New  York  subject  to  assessment  pur- 
suant to  section  7  of  the  Tax  Law. 

"  On  the  other  hand,  a  case  decided  in  1903  on  a  similar 
state  of  fact  held  that  there  was  capital  invested  in  business 
in  this  State.  (Dumnd-Ruel  v.  Wells,  41  Misc.  145 ;  affd., 
92  App.  Div.  622,  without  opinion.) 

Durand-Ruel  had  a  stock  of  pictures  of  the  average  value 
of  $75,000.  They  maintained  a  continuous  bank  account 
here  sufficient  to  pay  current  expenses,  consisting  of  salaries, 
rents  and  import  duties.  As  paintings  are  sold  they  are  re- 
placed by  new  ones.  They  leased  an  entire  building  for 
$20,000  a  year,  reserving  one  floor  for  themselves,  and  sub- 
letting the  remainder. 

"  In  two  recent  decisions  the  fact  that  a  foreign  corpora- 
tion had  no  bank  account  in  its  own  name  in  New  York 
seems  to  have  been  an  important  if  not  a  determining  factor 
in  holding  that  these  corporations  did  not  have  capital  in- 
vested in  business  subject  to  taxation.  In  one  of  the  cases 
mentioned,  the  Tower  case,  the  facts  appear  from  the  follow- 
ing extract  from  the  opinion  of  the  Appellate  Division : 

"  '  The  relator  is  a  foreign  corporation  organized  under 
the  laws  of  the  State  of  Maine,  in  which  State  it  has  its 
principal  place  of  business.  Its  plant  is  located  in  Massa- 
chusetts, where  it  carries  on  the  business  of  manufacturing 
water-proof  clothing.  It  maintains  and  had  maintained  a 
salesroom  in  the  city  of  New  York  for  the  past  five  or  six 
years,  and  at  the  time  of  the  levying  of  the  assessment  had 
goods  on  hand  at  its  place  of  business  in  the  city  of  New 
York  of  the  value  of  $13,490,  and  the  average  value  of  the 
stock  kept  on  hand  in  such  place  of  business  was  about 
$8,000.  The  store  which  it  occupies  is  on  the  ground  floor 
of  35  Howard  street,  is  about  28  feet  wide  by  100  feet  in 
depth.  In  connection  with  the  business  it  has  a  manager, 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  107 

two  salesmen,  a  typewriter  and  a  bill  and  shipping  clerk.  It 
keeps  no  bank  account  in  the  city  of  New  York  and  all 
checks,  drafts  and  other  payments  for  goods  sold  are  remit- 
ted to  Boston  for  deposit.  The  manager  draws  a  draft  upon 
the  relator  in  Massachusetts  upon  an  average  of  once  a  week 
for  money  sufficient  to  pay  the  expenses  connected  with  the 
business,  although  some  money,  the  proceeds  of  the  business, 
is  kept  in  the  safe  at  its  place  of  business  here  and  is  used  to 
pay  running  expenses.  This  sum  is  never  very  large.  The 
goods  which  are  shipped  to  the  New  York  house  are  mainly 
reshipped  and  distributed  to  various  parts  of  the  country, 
although  above  one-tenth  of  the  goods  received  are  sold  in 
the  city  of  New  York;  it  sometimes  runs  above  that  per- 
centage. Much  of  the  larger  proportion  of  the  goods  received 
are  reshipped  to  points  outside  the  State  of  New  York/  (98 
App.  Div.  82;  affd.,  182  K  Y.  533.) 

"  The  second  case  was  that  of  A.  Leschen  &  Sons,  which 
was  decided  by  Judge  0' Gorman,  on  the  authority  of  the 
Tower  case,  and  the  assessment  was  canceled.  The  following 
facts  appear  from  the  petition: 

"  '  Leschen  &  Sons  was  a  foreign  corporation  organized 
under  the  laws  of  the  State  of  Missouri.  Its  business  was 
to  manufacture  wire  rope,  and  its  plant  was  in-  the  State  of 
Missouri.  It  had  a  branch  office  at  90'  West  street,  in  the 
borough  of  Manhattan,  city  of  New  York,  for  which  it  paid 
$7,000  a  year.  It  had  maintained  an  office  in  the  city  of 
New  York  continuously  for  over  seven  years,  and  in  1902 
had  made  application  to  the  Comptroller  of  the  State  of  New 
York  for  the  usual  certificate  to  do  business  under  the  Gen- 
eral Corporations  Law.  It  maintained  a  storage  room  where 
goods  were  kept  on  hand  continuously,  the  average  amount 
being  about  $14,000.  The  New  York  office  was  advertised 
as  a  branch  office  on  the  bill  heads  and  office  stationery. 
The  majority  of  the  sales  orders  filled  from,  stock  in  New 
York  were  sent  direct  to  the  main  office  in  St.  Louis,  but  in 
many  cases  goods  were  sold  directly  from  stock  in  New  York, 
and  the  proceeds  of  the  sales  were  received  in  New  York. 


108  STATE  OF  XEW  YORK 

Checks  were  mailed  to  the  main  office  in  St.  Louis,  but  cash 
was  retained  to  pay  current  expenses,  and  any  balance  de- 
posited in  the  personal  account  of  the  manager  who  remitted 
checks  for  these  balances  to  the  main  office.' 

"  The  opinion  was  printed  in  the  New  York  Law  Journal  on 
February  14,  1910. 

"A  consideration  of  the  Tower,  Parker  Mills,  and  Leshcen 
cases  seems  to  make  it  clear  that  there  must  be  a  stock  of 
goods  kept  in  E"ew  York  continuously,  and  there  must  be  a 
bank  account  in  the  name  of  the  nonresident  assessed." 

In  regard  to  the  taxation  of  tangible  personal  property,  sec- 
tion 7,  subdivision  2,  reads  as  follows : 

"  The  personal  property  of  nonresidents  of  the  State  hav- 
ing an  actual  situs  in  the  State,  and  not  forming  a  part  of 
capital  invested  in  business  in  the  State,  shall  be  assessed 
in  the  name  of  the  owner  thereof  for  the  purpose  of  identifi- 
cation and  taxed  in  the  tax  district  where  such  property  is 
situated,  unless  exempt  by  law.  This  subdivision  shall  not 
apply  to  money,  or  negotiable  collateral  securities,  deposited 
by,  or  debts  owing  to,  such  nonresidents  nor  shall  it  be  con- 
strued as  in  any  manner  modifying  or  changing  the  law  im- 
posing a  tax  on  real  estate  mortgage  securities." 

The  comment  of  the  New  York  City  Department  of  Taxes  and 
Assessments  upon  this  section  is  as  follows: 

"  It  is  understood  to  have  been  the  intention  of  the  drafts- 
men of  this  subdivision  chiefly  to  tax  household  furniture, 
pictures,  rugs,  yachts,  habitually  kept  in  this  State  by  non- 
residents of  the  State.  But  the  language  is  capable  of  a 
much  broader  construction,  and  may  be  deemed  to  confer  the 
right  to  tax  as  property,  and  not  as  '  capital  invested  in  busi- 
ness/ merchandise  and  other  personal  property  having  an 
actual  situs  in  this  State,  owned  by  a  nonresident.  So  that, 
in  case  nonresident  merchants  have  goods,  store  fixtures  and 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  109 

other  personalty  in  this  State,  and  yet  are  not  doing  business 
in  this  State  as  that  expression  in  section  7,  subdivision  1 
has  been  construed  by  the  courts,  this  subdivision  2  permits 
of  the  taxation  of  such  goods,  etc.,  as  property  just  as  a  resi- 
dent would  be  taxed  upon  it.  In  taxing  under  this  subdivi- 
sion, however,  no  deduction  of  debts  is  allowed." 

Failure  of  the  Law 

Investigation  of  County  Records.  The  investigations  of  the 
Committee  disclose  the  fact  that  foreign  corporations  as  a  group 
escape  paying  taxation  upon  personal  property  almost  entirely. 
For  the  purpose  of  ascertaining  the  extent  of  the  evasion  of  the 
personal  property  tax  by  foreign  corporations,  the  Committee  at- 
tempted to  obtain  information  from  the  localities  as  to  the  taxa- 
tion of  foreign  corporations. 

Section  61  of  the  Tax  Law  provides  as  follows: 

"  The  clerk  of  each  board  of  supervisors  shall  on  or  before 
the  second  Monday  in  December,  transmit  to  the  State  Board 
of  Tax  Commissioners,  in  the  form  to  be  prescribed  by  such 
Board  of  Tax  Commissioners,  a  certificate  of  return  of  the 
aggregate  assessed  and  equalized  valuation  of  the  real  and 
personal  estate  in  each  tax  district  as  the  value  of  such  real 
estate  has  been  created  by  such  board,  and  the  amount  of 
taxes  assessed  thereon  for  town,  city,  school,  county  and 
State  purposes,  also  the  aggregate  assessed  valuation  of  per- 
sonal property  classified  as  follows:  *  *  *  Subdivision 
6.  Property  of  foreign  corporations  assessed  pursuant  to  sec- 
tion 7." 

An  examination  of  the  statements  of  the  aggregate  valuations 
of  personal  property  pursuant  to  section  61  of  the  Tax  Law  in  the 
several  towns  and  cities  in  each  county,  filed  in  the  office  of  the 
State  Board  of  Tax  Commissioners,  disclosed  the  fact  that  only 
eight  counties  out  of  the  sixty-two  in  the  State  returned  this  in- 
formation in  partial  or  complete  form  as  required  by  law.  Cor- 


110  STATE  OF  NEW  YORK 

respondence  with  the  clerks  of  the  boards  of  supervisors  and  tax 
assessors  of  the  several  counties  disclosed  the  fact  that  in  very  few 
localities  is  any  attempt  made  to  ascertain  the  taxable  personalty 
of  foreign  corporations.  The  data  obtained,  however,  in  this  in 
vestigation  was  too  incomplete  to  determine  precisely  to  what  ex- 
tent the  personal  property  of  foreign  corporations  escaped  taxa- 
tion. The  evidence  obtained,  however,  establishes  a  very  strong 
presumption  that  less  than  10  per  cent  of  the  personal  property 
of  foreign  corporations  liable  to  taxation  is  actually  assessed. 

In  the  second  investigation  the  Committee  obtained  the  names 
of  some  250  important  foreign  corporations  known  to  carry  on 
large  business  in  the  State  of  New  York  and  to  have  considerable 
amounts  of  actual  taxable  personalty  permanently  located  in  this 
State.  To  these  corporations  was  sent  a  printed  blank  form  re- 
questing information  as  to  the  following  items : 

(1)  The  percentage  of  the  total  assets  of  the  corporation  in- 
vested permanently  in  New  York  .State. 

(2)  The  amount  of  taxable  personalty  permanently  located  in 
New  York. 

(3)  The  locality  which  the  corporation  claimed  as  its  principal 
place  of  business  in  New  York. 

(4)  The  assessed  value  of  personal  property  in  New  York. 

(5)  The  actual  amount  of  personal  property  tax  paid  in  New 
York. 

The  failure  of  the  corporations  even  to  acknowledge  these  re- 
quests was  enlightening.  Of  the  250  corporations  only  about 
thirty  acknowledged  the  receipt  of  the  Committee's  communica- 
tion, and  only  nine  attempted  to  fill  out  the  blank,  and  of  the  nine 
only  four  actually  filled  in  the  required  information.  Several  of 
the  corporations  reported  that  they  paid  no  taxes,  and  most  main- 
tained that  inasmuch  as  they  were  foreign  corporations  they  were 
not  liable  to  taxation.  It  is  perfectly  evident  from  these  replies 
that  the  average  foreign  corporation  either  believes  that  it  is  not 
liable  for  taxation  under  New  York  law  or  else  knows  that  it 
<san  escape  under  the  present  system. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  111 

A  great  many  of  the  foreign  corporations  having  valuable  tangi- 
ble assets  in  the  State  of  New  York  have  undoubtedly  been  ad- 
vised by  their  lawyers  that  their  tangible  personal  property  can- 
not be  taxed  under  the  1902  decision  of  the  Court  of  Appeals, 
known  as  the  McLean  decision.  The  relation  of  this  decision  to 
the  New  York  Tax  Law  was  summed  up  by  Mr.  Henry  M.  Powell 
of  the  New  York  Bar  in  a  paper  read  before  the  1915  New  York 
State  Conference  on  Taxation,  as  follows: 

"  Ever  since  1855  there  has  been  a  statute  on  our  books 
by  which  the  property  of  a  nonresident  invested  in  business 
shall  be  taxed  to  the  same  extent  as  the  property  of  residents. 
In  1902  it  was  held  by  the  Court  of  Appeals  in  the  City  of 
New  York  v.  McLean,  170  N.  Y.  374,  that  this  tax  could  not 
be  collected  by  an  action  in  personam.  In  other  words,  our 
remedy  must  remain  one  in  rem,  or  against  the  property. 
Since  that  time  our  statute  has  not  been  amended  to  conform 
to  the  opinion  of  the  Court  of  Appeals  and  the  result  has 
been  that  property  of  nonresidents,  invested  in  business,  pays 
only  a  nominal  tax  because  there  is  no  effective  remedy  for 
the  collection  of  the  tax.  In  1901  before  the  McLean  de- 
cision, the  annual  tax  collection  in  the  City  of  New  York 
for  nonresidents  was  about  $900,000.  In  1913  and  for  some 
years  prior  thereto,  it  has  averaged  about  $500,000,  although 
population  has  increased  50  per  cent  and  property  of  all 
kinds  has  correspondingly  increased." 

Testimony  Concerning  Failure  of  the  Personal  Property  Tax 
in  Regard  to  Foreign  Corporations 

At  the  public  hearings  of  the  New  York  Joint  Legislative  Com- 
mittee on  Taxation  held  in  the  various  cities  of  the  State  of  New 
York,  1915,  the  testimony  of  the  tax  officials,  both  State  and  local, 
was  unanimous  in  bearing  out  the  statement  that  foreign  corpora- 
tions escape  almost  entirely  from  paying  any  of  the  tax  burden 
under  the  personal  property  tax.  Chairman  Martin  Saxe  of  the 
State  Tax  Commission  was  asked  to  state  the  effect  of  the  McLean 


112  STATE  OF  NEW  YORK 

decision  upon  the  collection  of  nonresident  taxes.  He  answered, 
"  Well,  it  has  had  the  effect  of  making  those  taxes  practically 
uncollectible." 

Mr.  A.  C.  Playdell,  Secretary  of  the  New  York  Tax  Eeform 
Association,  testified  that  there  is  practically  no  personal  prop- 
erty of  nonresidents  collected  in  the  State  of  New  York  outside 
of  New  York  City. 

Mr.  Lawson  Purdy,  of  the  Board  of  Tax  Commissioners  of 
New  York  city,  in  answer  to  the  effect  of  the  McLean  decision, 
testified  as  follows: 

"  Since  that  decision  was  rendered,  the  City  of  New  York, 
in  practice,  has  been  without  power  to  enforce  the  payment 
of  taxes  levied  pursuant  to  section  7,  Some  years  ago  the 
amount  of  uncollectible  taxes  which  had  been  levied  pur- 
suant to  that  section  was  a  very  serious  matter.  In  recent 
years,  where  it  has  been  found  impossible  to  collect  taxes  from 
a  particular  person  or  corporation,  pursuant  to  section  7,  the 
assessment  has  been  abandoned." 

In  fine,  Mr.  Pleydell  says  that  there  is  no  personalty  of  foreign 
corporations  assessed  outside  of  New  York  City,  and  Mr.  Purdy 
says  that  even  in  New  York  City  the  tax  is,  in  the  main,  unen- 
forceable. Furthermore,  Mr.  Purdy  testified  that  he  could  see 
no  way  under  the  general  scheme  of  the  tax  laws  that  now  exist 
to  reach  foreign  corporations. 

In  the  city  of  Rochester,  Mr.  Joseph  C.  Wilson,  President  of 
the  Board  of  Assessors,  in  reply  to  the  query  as  to  the  amount  col- 
lected from  foreign  corporations,  stated:  "  Very  few  can  we 
get.  The  majority  of  foreign  corporations,  particularly  the  large 
ones,  fix  their  main  office  for  the  State  of  New  York  in  New  York 
City  or  Buffalo,  mostly  in  New  York  City,  and  in  that  way  es- 
cape." He  further  testified  that  they  carried  large  amounts  of 
goods  in  Rochester  that  could  not  be  assessed. 

From  the  combined  testimony  of  Messrs.  Saxe,  Pleydell,  Purdy 
and  Wilson,  it  is  unmistakably  evident  that  foreign  corporations 
are  escaping  substantially  tax-free  in  regard  to  all  of  their  vast 
investments  in  personalty  in  the  State  of  New  Tor*. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  113 

Why  Foreign  Corporations  Should  Make  a  Substantial  Con- 
tribution to  the  support  of  State  and  Local  Govern- 
ment. 

In  regard  to  foreign  corporations,  New  York  State  occupies  a 
unique  position,  and  this  unique  position  explains  in  a  large  part 
why  the  foreign  corporation  question  is  of  so  great  importance. 
In  order  to  appreciate  the  peculiar  significance  of  this  problem,  it 
is  necessary  to  examine  the  relation  of  New  York  to  the  business 
of  the  foreign  corporation. 

The  first  thing  to  call  attention  to  is  the  tremendous  taxpaying 
ability  of  foreign  corporations  doing  business  in  New  York  State. 
And  this  taxpaying  ability  is  surprisingly  large,  whether  measured 
by  the  tangible  assets  situated  in  the  State,  the  business  transacted 
in  the  State,  the  product  produced  in  the  State,  or  the  financial 
concerns  handled  within  the  State.  An  examination  of  each  of  the 
above  discloses  the  fact  that  foreign  corporations  own  a  large 
percentage  of  tangible  assets  in  the  State  and  transact  a  larger 
percentage  of  the  total  business  done  in  the  State  than  the  aver- 
age citizen  has  any  comprehension  of.  In  this  respect  the  position 
of  New  York  is  unique  and  in  several  ways  stands  out  quite  apart 
from  most  of  her  sister  states.  Some  comprehension  of  the  vast- 
ness  of  this  business  can  be  obtained  by  examining  the  follow- 
ing facts : 

In  the  first  place,  the  position  which  New  York  City  occupies  as 
the  financial  centre  of  America  attracts  to  it  for  the  transaction  of 
its  financial  concerns  a  large  proportion  of  all  the  important  cor- 
porations in  the  United  States.  The  importance  and  indeed  even 
the  necessity  of  transacting  the  financial  concerns  in  New  York 
City  are  too  well  known  among  business  men  to  call  for  any 
elaboration.  It  suffices  to  say  that  out  of  the  privilege  of  trans- 
acting financial  business  in  this  State  come  great  advantages  to 
those  corporations  establishing  offices  here.  And  these  advantages 
mean  larger  earnings  and  greater  taxpaying  ability. 

In  the  second  place,  New  York  State  possesses  within  its  boun- 
daries ten  million  people,  or  approximately  one-tenth  the  popu- 
lation of  the  entire  United  States.  In  addition  to  this,  there  is 
another  five  million  people  in  the  cities  and  towns  about  New 


114  STATE  OF  NEW  YORK 

York  City  that  technically  reside  in  other  States,  but  actually  live 
within  the  New  York  market.  The  opportunity  of  reaching  such 
a  large  population  within  such  a  circumscribed  area  is  taken  ad- 
vantage of  by  almost  every  important  selling  agency  in  America. 
Several  large  foreign  corporations,  each  one  of  which  is  capital- 
ized for  several  million  dollars,  sell  a  large  part  of  their  product 
through  branch  offices  scattered  throughout  the  State.  They  draw 
tremendous  profits  from  this  State  and  so  increase  their  earnings 
and  taxpaying  ability. 

In  the  third  place,  in  many  lines  of  industry  New  York  is  the 
selling  market  of  America.  Many  foreign  corporations  who  have 
their  factories  in  the  New  England  and  Middle  States  and  even 
in  the  Western  States,  find  it  necessary  to  come  to  New  York 
to  market  their  product.  A  good  illustration  is  the  wholesale 
woolen  industry.  This  industry  is  largely  owned  and  controlled 
by  foreign  corporations.  Its  mills  are  scattered  all  over  New 
England  and  many  other  States.  Yet  the  industry  is  absolutely 
dependent  upon  New  York  for  the  sale  of  its  goods.  The  home 
office  of  most  of  these  corporations  is  found  in  other  states,  but 
the  selling  office  is  located  in  New  York  City.  Every  year  the 
representatives  of  these  great  corporations  travel  throughout  the 
United  States  exhibiting  their  samples,  but  it  is  a  well-known  fact 
that  many  of  the  sales  are  actually  made  in  New  York  where  the 
buyers  flock  every  season.  To  the  woolen  industry  as  well  as  to 
other  big  industries  the  New  York  market  is  a. tremendous  asset 
which  is  reflected  in  increased  earning  power  and  taxpaying 
ability. 

In  the  fourth  place,  the  unrivaled  shipping  facilities  of  New 
York  have  attracted  many  corporations  that  are  incorporated 
in  other  states.  The  advantage  of  New  York  in  this  respect  is 
evidenced  by  the  great  number  of  foreign  corporations  that  have 
in  recent  years  shut  down  or  dismantled  their  plants  in  other 
states,  and  have  built  new  ones  in  the  tide-water  district  in  New 
York  State,  especially  on  Long  Island. 

One  reason,  however,  why  foreign  corporations  control  such  a 
large  percentage  of  New  York  business  is  due  not  to  the  fact  that 
foreign  corporations  come  to  New  York,  but  that  the  New  York 
plants  go  to  the  foreign  corporations.  In  this  respect  a  remarkable 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  115 

transition  has  been  taking  place  during  the  last  few  years.  Many 
plants,  both  mercantile  and  manufacturing,  that  were  once  the 
property  of  domestic  corporations  have  become  the  property  of 
foreign  corporations.  An  examination  of  Poor's  or  Moody' s  Man- 
ual discloses  part  of  this  very  interesting  history.  As  the  great 
trusts  and  holding  companies  have  developed,  they  have  absorbed 
many  of  the  smaller  corporations.  Had  these  larger  companies 
incorporated  in  New  York,  it  would  have  made  little  difference 
from  the  point  of  view  of  taxation.  Since,  however,  they  have 
mostly  incorporated  in  New  Jersey,  Delaware  and  other  states, 
the  effect  has  been  to  carry  the  domicile  of  much  of  our  wealth  over 
into  other  states. 

As  a  revenue  producer  it  is  clear,  therefore,  that  that  great 
mass  of  personal  property  belonging  to  foreign  corporations  is  of 
little  use  to  New  York  State.  It  is  impossible  to  estimate  how 
much  New  York  is  losing  through  the  absorption  of  her  domestic 
corporations  by  foreign  corporations.  It  has  been  estimated, 
however,  that  the  State  has  been  losing  not  less  than  a  million 
dollars  of  revenue  every  year  as  a  result  of  the  McLean  decision. 

In  summarizing  the  answer  to  the  question  why  foreign  cor- 
porations ought  to  make  substantial  contributions,  we  must  say: 

In  the  first  place,  these  foreign  corporations  enjoy  unusual 
benefits  in  New  York  City.  The  opportunities  which  these  cor- 
porations avail  themselves  of,  whether  they  be  the  financial  ac- 
commodations, the  shipping  facilities,  or  the  strategic  merchan- 
dising possibilities,  all  add  greatly  to  the  prosperity  and  the  in- 
come-paying ability.  An  office  in  New  York  for  financial  or  sell- 
ing purposes  is  a  great  asset.  These  corporations  spend  millions 
in  advertising  annually  and  from  that  advertising  gain  an  earn- 
ing power.  The  increased  earning  power,  however,  which  New 
York  contributes,  represents  in  many  cases  a  gift  of  the  city  and 
State.  This  same  increased  earning  power  enlarges  their  ability 
to  pay  taxes.  Thus,  New  York  actually  adds  in  an  important 
degree  both  to  the  capital  value  and  to  the  income  of  these 
corporations. 

On  the  other  hand,  the  privilege  extended  to  foreign  corpora- 
tions cost  the  citizens  of  this  State  large  sums.  Fire  protection, 
police  protection  and  all  the  other  expenses  that  are  incurred  in 


116  STATE  OF  ^\EW   YORK 

keeping  up  a  great  trade  and  financial  centre  are  largely  increased 
by  the  presence  of  these  foreign  corporations.  From  every  point 
of  view,  whether  from  that  of  the  cost  of  the  service,  the  benefit 
derived  or  the  ability  to  pay,  the  answer  is  clear ;  foreign  corpora- 
tions should  contribute  liberally  to  the  support  of  New  York  State 
government. 


PART  VII 
NEW  YORK  SYSTEM  OF  TAXING  MANUFACTURES 

CHAPTER  I 
STATE  TAX 

The  policy  of  New  York  in  regard  to  the  taxation  of  manu- 
factures for  State  purposes  has-been  for  many  years  practically 
that  of  exemption.  The  law  governing  the  taxation  of  manu- 
facturing for  State  purposes  is  included  in  sections  182  and  183 
of  the  Tax  Law.  Section  182  reads,  in  part,  as  follows: 

ff  Franchise  tax  on  corporations.  For  the  privilege  of 
doing  business  or  exercising  its  corporate  franchises  in  this 
State,  every  corporation,  joint-stock  company  or  association, 
doing  business  in  this  State,  shall  pay  to  the  State  Treasurer 
annually,  in  advance,  an  annual  tax  to  be  computed  upon 
the  basis  of  the  amount  of  its  capital  stock,  employed  during 
the  preceding  year  within  this  State,  and  upon  each  dollar  of 
such  amount.  The  measure  of  the  amount  of  capital  stock 
employed  in  this  State  shall  be  such  a  portion  of  the  issued 
capital  stock  as  the  gross  assets  employed  in  any  business 
within  this  State  bear  to  the  gross  assets  wherever  employed 
in  business." 

Then  follows  a  detailed  statement  of  the  law  which  is  exceed- 
ingly complex. 

Manufacturing  corporations,  however,  are  exempt,  providing 
40  per  cent,  of  their  assets  are  invested  in  the  State  of  New  York. 

Section  183  reads  in  part  as  follows: 

laundering  corporations,  manufacturing  corpo- 
rations to  the  extent  only  of  the  capital  actually  employed 
in  this  State  in  manufacturing,  and  in  the  sale  of  the  product 
of  such  manufacturing,  mining  corporations  wholly  engaged 
in  mining  ores  within  this  State  *  *  *  shall  be  exempt 
from  the  payment  of  the  taxes  prescribed  by  section  182  of 
this  chapter.  But  such  a  laundering,  manufacturing  or 
mining  corporation  snail  not  be  exempt  from  the  payment 
of  such  tax,  unless  at  least  40  per  centum  of  the  capital  stock 


118  STATE  OF  NEW  YORK 

of  such  corporation  is  invested  in  property  in  this  State  and 
used  by  it  in  its  laundering,  manufacturing  or  mining  busi- 
ness in  this  State." 

According  to  the  law,  it  would  seem  that  a  large  number  of 
manufacturing  corporations  should  be  taxable  for  State  purposes. 
An  analysis  of  the  business  and  financial  statements  of  many  im- 
portant New  York  manufacturing  corporations  as  given  in  the 
corporation  manuals,  would  seem  to  indicate  that  an  important 
number  of  such  corporations  have  less  than  40  per  cent,  of  their 
assets  invested  in  the  State.  It  appears,  however,  that  no  very 
serious  attempt  had  been  made  to  ascertain  which  of  these  corpo- 
rations are  not  entitled  to  the  exemption  of  section  183,  and  that 
practically  all  manufacturing  corporations,  regardless  of  the 
amount  of  their  tangible  assets  invested  in  New  York  State, 
escape  paying  the  general  franchise  tax  on  corporations. 

CHAPTER  II 
LOCAL  TAXATION  OF  MANUFACTURING  CORPORATIONS 

Corporations  are  taxable  locally  upon  their  personal  property 
under  section  12  of  the  Tax  Law.  This  law,  with  its  peculiarities, 
has  been  described  in  Part  V  of  this  report.  Everything  there 
stated  in  regard  to  the  inability  to  enforce  the  law  applies  with 
particular  emphasis  to  the  manufacturing  corporations.  It  is 
sufficient  to  state  here  that  not  only  is  the  law  enforced  very  un- 
evenly and  with  considerable  inequity  as  between  various  manu- 
facturing centres,  but  that  it  yields  a  comparatively  insignificant 
revenue. 

The  inequity  of  the  present  law  is  well  brought  out  by  the 
statistics  presented  by  Mr.  John  D.  Kernan  of  Utica.  He  pre- 
sented a  report  at  the  First  New  York  State  Conference  on  Taxa- 
tion, and  at  the  request  of  the  Committee,  brought  the  statistics 
of  that  report  up  to  date  and  presented  similar  facts  at  the  Joint 
Legislative  Committee  hearings  in  New  York  City.  The  facts 
presented  in  his  paper  before  the  New  York  State  Conference  on 
Taxation  showed  unmistakably  that  manufacturers  in  some  lo- 
calities of  the  State  were  assessed  at  ridiculously  low  percentages, 
whereas  in  other  localities  their  personal  property  was  assessed 
at  a  fairly  high  value,  thus  producing  an  inequality  seriously 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  119 

detrimental  to  the  latter  business  interests.  In  his  testimony  be- 
fore us  he  summarized  his  investigation  as  follows ;  and  the  situa- 
tion of  which  he  describes  in  respect  to  Utica,  Home  and  the 
neighboring  towns  is  typical  of  the  inequalities  which  exist 
throughout  the  State. 

"  I  had  this  prepared  *  *  *  in  three  tables,  first 
showing  the  manufacturing  corporations  that  are  assessed 
for  personal  property  in  the  city  of  Utica,  showing  the 
amount  of  the  personal  property  assessment  in  the  year 
1914;  showing  the  real  property  assessment  for  that  year, 
and  that  being  pertiment,  in  order  to  determine  the  rate  of 
taxation  as  based  upon  Bradstreet's  estimates,  and  then  con- 
taining Bradstreet's  published  estimates  *  *  *  estimated 
wealth  of  each  of  those  corporations.  Then  I  have  next  done 
the  same  thing  with  all  the  manufacturing  corporations  as- 
sessed for  personal  property,  outside  of  the  cities  of  Rome 
and  Utica,  and  then  I  have  prepared  a  similar  table  for 
Rome  city  *  *  *. 

"An  examination  of  the  results  of  the  footing  of  these 
tables  shows  that  in  Utica  the  manufacturing  corporations 
are  assessed  upon  personal  property  25  or  36  per  cent,  of 
their  estimated  wealth  as  given  by  Bradstreet.  That  the 
corporations  in  the  counties  outside  of  Rome  and  Utica  are 
assessed  from  11  to  15  per  cent.  *  *  *  That  in  the 
City  of  Rome  manufacturing  corporations  are  assessed  from 
7  to  11  per  cent,  of  their  estimated  wealth.*" 

CHAPTER  III 

NEW  YORK  MANUFACTURING  INDUSTRY  AS  A  TAXABLE  BASE 
In  considering  the  possibilities  of  using  the  manufacturing 
industry  for  purposes  of  taxation,  the  first  question  to  ask  is,  to 
what  extent  the  tax  policy  of  the  State  should  be  altered  to  con- 
form with  the  State's  broader  economic  policy.  It  is  the  settled 
policy  of  the  State  of  New  York,  as  of  nearly  every  other  state 
in  the  Union,  to  attract  capital  into  the  manufacturing  industries. 
For  this  purpose  it  is  necessary  to  establish  no  conditions  that 
would  in  any  way  tend  to  drive  this  industry  from  the  State. 
The  ability  of  the  industry  to  grow  depends  upon  the  relative 


120  STATE  OF  NEW  YORK 

advantages  which  it  enjoys  as  compared  with  those  competing 
corporations  in  other  states  and  foreign  countries.  The  question, 
therefore,  arises,  would  a  material  increase  in  the  rate  of  taxa- 
ation  affect  to  any  appreciable  degree  the  ability  of  domestic 
manufacturing  corporations  to  compete  in  the  American  and 
world  markets.  In  regard  to  foreign  competition,  it  may  be  said 
that  it  is  the  settled  policy  of  the  country  that  American  manu- 
facturers shall  be  protected  against  competition  of  the  foreign 
manufacturers,  and  to  thisi  end  the  protective  tariff  shall  be  levied 
at  a  rate  which  will  compensate  for  the  difference  in  the  cost 
of  manufacturing  at  home  and  abroad.  Whenever  taxes  are  levied 
by  American  states,  they  enter  into  the  cost  of  the  manufactured 
articles,  and  to  that  extent  are  taken  account  of  in  the  framing  of 
the  tariff  schedules.  We  may,  therefore,  dismiss  from  further 
consideration  the  effect  of  New  York  tax  rates  upon  the  ability 
of  the  New  York  manufacturing  corporation  to  compete  with 
foreign  manufacturing  corporations. 

In  the  matter,  however,  of  competition  with  corporations  of 
other  states,  the  subject  cannot  be  dismissed  so  quickly.  In  the 
United  States  the  American  manufacturer  enjoys  the  largest  free- 
trade  market  existing  anywhere  in  the  world.  Whatever  the  con- 
ditions of  the  foreign  market,  it  is  absolutely  necessary  that  the 
New  York  manufacturer  be  able  to  compete  in  this  large  Ameri- 
can free-trade  market  upon  equal  terms  with  corporations  of  other 
States.  To  do  this  it  is  necessary  that  New  York  offer  facilities 
for  manufacturing  that  will  enable  the  New  York  corporation 
to  produce  goods  for  as  low  a  cost  as  any  other  State.  If  New 
York  should  impose  a  tax  rate  that  would  increase  the  cost  of 
manufacturing  to  any  considerable  degree  as  compared  with  that 
of  foreign  corporations,  not  only  would  new  capital  refuse  to 
come  into  this  State,  but  capital  already  invested  would  leave  so 
far  as  possible.  The  whole  matter,  therefore,  hinges  upon  the 
relative  facilities  offered  to  manufacturing  industries  in  this  State 
as  compared  to  others.  We  believe  that  the  advantages  which  the 
State  of  New  York  now  offers  to  manufacturing  corporations  are 
so  much  greater  than  those  of  any  of  its  competing  states  that  any 
reasonable  increase  in  the  tax  rate  would  not  in  any  way  tend  to 
drive  capital  from  this  State. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  121 

The  principal  factors  which  attract  investment  of  outside  capi- 
tal to  the  manufacturing  industries  of  the  State  are 

(1)  Nearness  to  abundant  supplies  —  raw  materials; 

(2)  Transportation  facilities; 

(3)  Labor  market; 

(4)  Power  facilities. 

For  purposes  of  ascertaining  the  relative  advantages  of  New 
York  in  regard  to  all  of  these  factors,  there  is  no  better  source 
than  the  bulletin  of  the  13th  Census  of  the  United  States  dealing 
with  manufactures  of  New  York. 

The  advantage  of  New  York  in  regard  to  raw  materials  is  set 
forth  as  follows : 

u  The  geographic  position  and  topography  of  New  York, 
as  well  as  the  abundant  natural  wealth  of  its  fields,  forests, 
mines,  and  quarries,  have  contributed  to  its  industrial  de- 
velopment and  have  been  instrumental  in  making  it  the  lead- 
ing manufacturing  State  of  the  Union." 

In  regard  to  transportation  facilities,  the  following: 

"  The  Hudson  river,  the  Erie  canal,  connecting  Lake  Erie 
with  the  Hudson  river,  and  a  system  of  canals  which  con- 
nect Lake  Ontario  with  the  Erie  canal  and  Lake  Champlain 
with  the  Hudson  river,  form  a  network  of  inland  waterways 
for  the  exchange  of  various  commodities  within  the  State 
and  furnish  excellent  communication  by  water  from  Duluth 
and  Chicago  in  the  West  and  from  various  points  in  Canada 
on  the  North  to  New  York  City,  thereby  affording  an  outlet 
for  coastwise  and  foreign  commerce  through  the  most  im- 
portant seaport  in  the  United  States.  A  large  majority  of 
the  commercial  and  manufacturing  centres  of  the  State  are 
located  on  these  waterways  or  on  the  connecting  waterways 
which  border  the  <State.  The  8,448  miles  of  steam-railway 
trackage  within  the  State  also  afford  excellent  transportation 
facilities." 

The  advantage  of  New  York  to  the  manufacturer  in  the  matter 
of  transportation  facilities  is  fully  borne  out  by  the  testimony  of 
the  manufacturers  themselves.  Hon.  John  D.  Kernan  of  Utica, 


122  STATE  OF  NEW  YORK 

in  appearing  before  the  Joint  Legislative  Committee,  testified  as 
follows : 

"  The  coming  opportunities  that  the  State  is  going  to  have 
with  the  opening  of  the  Barge  Canal,  The  transportation 
opportunities  are  going  to  be  greater  in  the  State  of  New 
York,  when  that  is  opened,  through  the  influence  that  they 
will  have,  not  only  in  the  rate  that  it  will  give  itself,  but 
in  the  control  that  it  will  give  over  railroad  rates,  than  any 
other  place  in  the  United  States. "  And  again  he  stated: 
"  New  .York  State  has,  over  and  above  Pennsylvania,  or 
Connecticut,  or  Rhode  Island,  or  any  other  State,  great  ad- 
vantages for  manufacturing  industries,  and  this  is  very  well 
illustrated  by  the  fact  that  for  fifty  years  the  trunk  lines 
have  had  to  maintain  a  differential  of  two  or  three  cents  a 
hundred  for  like  service,  in  favor  against  New 

York  State,  in  favor  of  Philadelphia,  Baltimore,  Newport 
News  and  those  Southern  ports,  etc.,  New  Orleans.  Other- 
wise the  natural  advantages  of  New  York  would  draw  all 
the  traffic  here,  and  it  has  not  been  thought  wise  by  the  trunk 
line  people  to  permit  that  to  be  done.  Now,  that  illustrates 
the  situation  New  York  has  as  to  its  natural  advantages  for 
manufacturing,  etc." 

In  regard  to  labor  facilities,  it  is  sufficient  to  state  that  New 
York  enjoys  the  greatest  labor  market  in  America. 

Mention  should  be  made  of  the  important  advantages  which 
have  come  to  the  manufacturing  industries  of  the  State  through 
the  large  expenditures  of  New  York  in  recent  years  for  develop- 
ment of  barge  canals.  For  this  purpose  the  State  has  and  is  now 
expending  millions  of  dollars. 

The  importance  of  these  improvements  to  the  manufacturing 
industry  can  hardly  be  overestimated.  Indeed,  when  measures 
providing  for  these  expenditures  were  put  before  the  people  for 
ratification,  the  chief  argument  advanced  at  the  time  was  that  the 
construction  of  these  canals  would  cover  the  State  with  manufac- 
turing towns  and  cities.  A  study  of  the  distribution  of  the  im- 
portant manufacturing  cities  and  of  the  growth  of  these  cities 
since  these  improvements  have  been  made  bear  out  this  contention. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  123 

In  view  of  the  advantages  stated  above,  there  appears  no  reason- 
able doubt  that  the  manufacturing  industry  of  the  State  could 
bear  a  considerable  increase  in  its  burden  of  taxation  without 
driving  capital  from  the  State  and  with  no  fear  of  deterring  new 
capital  from  entering  the  State.  In  this  connection  it  should  be 
noted  that  in  many  recent  consolidations  the  larger  corporations 
have  shut  down  their  plants  located  in  other  states  and  are  now 
building  new  plants  in  New  York  State. 

The  importance  of  the  manufacturing  industry  as  compared 
with  that  of  other  great  industries  in  New  York  is  so  great  that 
an  increase  in  taxation  of  this  industry  at  a  very  low  rate  would 
yield  a  large  revenue.  For  the  purpose  of  gauging  the  potential- 
ities of  the  manufacturing  industry  as  a  tax  base,  it  is  important 
therefore  to  consider  the  extent  and  growth  of  manufactures. 
This  can  be  done  in  no  better  way  than  by  quoting  some  extracts 
from  the  brief  general  summary  of  the  1910  Census  Bulletin  deal- 
ing with  New  York  manufactures. 

"Although  New  York  has  important  interests  in  agriculture 
and  mining,  its  predominance  is  most  marked  in  manufac- 
turing. Since  the  completion  of  the  Erie  canal  in  1825,  New 
York  has  held  the  foremost  rank  in  this  respect.  *  *  * 

"  In  1849  the  total  value  of  the  manufactured  products  of 
New  York,  including  those  of  the  neighborhood  and  hand 
industries,  amounted  to  $237,597,249,  while  in  1909,  ex- 
clusive of  the  value  of  the  products  of  the  neighborhood  and 
hand  industries,  it  reached  a  total  of  $3,369,490,192,  or  more 
than  fourteen  times  that  in  1849.  During  the  same  period 
the  population  of  the  State  increased  194.2  per  cent.  In 
1849  an  average  of  199,349  wage  earners,  representing  6.4 
per  cent  of  the  total  population,  were  employed  in  manu- 
factures, while  in  1909  an  average  of  1,003,981  wage  earners 
or  11  per  cent  of  the  total  population,  were  so  engaged. 
During  this  period  the  gross  value  of  products  per  capita  of 
the  total  population  of  the  State  increased  from  $77  to  $370. 

"  In  1909  the  State  of  New  York  had  44,935  manufactur- 
ing establishments,  which  gave  employment  to  ah  average 
of  1,203,241  persons  during  the  year  and  paid  out  $743,- 
263,000  in  salaries  and  wages.  Of  the  persons  employed, 


124  STATE  OF  NEW  YOKK 

1,003,981  were  wage  earners.  These  establishments  turned 
out  products  to  the  value  of  $3,369,490,000,  to  produce  which 
materials  costing  $1,856,904,000  were  utilized.  The  value 
added  by  manufacture  was  thus  $1,512,586,000,  which  figure, 
as  explained  in  the  introduction,  best  represents  the  net 
wealth  created  by  manufacturing  operations  during  the  year." 

The  relative  importance  of  the  manufacturing  industry  of  New 
York  is  further  illustrated  by  the  wide  diversity  in  the  manufac- 
turing activities  of  the  State.  "  With  the  exception  of  Penn- 
sylvania, the  diversity  is  greater  in  New  York  than  in  any  other 
State  in  the  Union."  Of  the  264  classifications  used  in  the 
presentation  of  the  1909  manufactures  statistics  for  the  country 
as  a  whole,  243  were  represented  in  New  York. 

The  size  and  great  wealth  of  many  of  these  manufacturing  cor- 
porations that  are  now  almost  entirely  escaping  their  fair  burden 
of  the  general  property  tax,  so  far  as  personalty  is  concerned,  is 
well  brought  out  by  the  following  statistics  taken  from  page  4  of 
the  1910  Bulletin  dealing  with  manufactures  in  New  York. 

"  The  table  referred  to  gives  separate  statistics  for  139 
industries  or  industry  groups  for  which  products  valued  at 
more  than  $1,000,000  were  reported  in  1909.  These  in- 
dustries include  12  with  products  exceeding  $50,000,000  in 
value,  20  with  products  between  $25,000,000  and  $50,000,- 
000  in  value,  and  26  with  products  between  $10,000,000  and 
$25,000,000,  making  an  aggregate  of  58  industries  with  a 
value  of  products  in  excess  of  $10,000,000  each.  The  other 
industries  shown  separately  comprise  30  with  products  be- 
tween $5,000,000  and  $10,000,000  in  value,  and  51  with 
products  between  $1,000,000  and  $5,000,000. 

"  In  addition  to  the  industries  presented  separately  in  the 
table,  there  were  32  other  industries  in  the  State  which  re- 
ported products  in  1909  to  the  value  of  $1,000,000  or  over, 
comprising  5  with  products  exceeding  $10,000,000  in  value, 
2  with  products  between  $5,000,000  and  $10,000.000  in 
value,  and  25  with  products  between  $1,000,000  and  $5,000,- 
000  in  value." 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  125 

POTENTIALITIES  OF  THE  MANUFACTURING  INDUSTRY  AS  A  TAX- 
ABLE BASE 

Tlie  possibilities  of  the  manufacturing  industry  as  a  taxable 
base  will  be  grasped  by  an  examination  of  the  statistics  of  manu- 
facturing published,  respectively,  by  the  Federal  Census  Bureau 
in  1910  and  the  Internal  Revenue  Bureau  in  1914.  The  follow- 
ing are  the  principal  statistics  taken  from  the  Federal  census. 
They  are  for  the  year  1909  : 

Total  capital  invested  in  manufacturing  in  New 

York $2,779,496,814 

Value  of  products 3,369,490,192 

Value  added  by  manufacture 1,512,58,5,850 

'Net  returns   383.249,162 


The  following  statistics  are  taken  from  the  1914  report  of  In- 
ternal Revenue  Department,  in  regard  to  the  receipts  from  the 
Federal  Income  Tax: 

Number    of    manufacturing    corporations    re- 
turning income  tax  data 12,640 

Number  of  manufacturing  corporations  whose 

returns  show  tax  due 6,446 

Capital  stock  of  domestic  manufacturing  cor- 
porations  $6,644,640,357  84 

Bonded  and  other  indebtedness. 2,134,031,252  41 

Net  income    522,666,412  05 


In  comparing  these  two  sets  of  data  it  should  be  noted  that 
the  internal  revenue  statistics  of  the  capital  stock  of  domestic  cor- 
porations was  more  than  double  the  census  statistics  of  the  total 
capital  invested  in  manufacturing  in  New  York.  This  difference 
is  partly  to  be  accounted  for  by  the  increase  in  the  growth  of 
manufactures  between  the  years  1909  and  1914,  and  partly  by  the 
fact  that  the  Census  statistics  undoubtedly  underestimated  the 
actual  capital  investment  in  manufactures  in  New  York  State. 
It  is  possible  also  that  the  Internal  Revenue  statistics,  in  in- 
cluding the  total  capital  stock  of  domestic  manufacturing  corpo- 
rations irrespective  of  where  the  property  may  be  located,  thereby 


126  STATE  OF  NEW  YORK 

takes  in  a  larger  item  than  that  represented  by  the  capital  in- 
vestment in  New  York  State  of  foreign  corporations,  the  latter 
item,  of  course,  not  being  included  within  the  Internal  Kevenue 
statistics  for  New  York.  It  is  believed,  however,  that  the  In- 
ternal Revenue  statistics  are  fairly  representative  of  the  total 
capital  investment  in  manufactures  in  the  State  of  New  York. 

CHAPTER  IV 
THE  YIELD  IN  NEW  YORK 

In  considering  the  yield  of  manufactures  as  a  tax  base  it  is 
necessary  to  distinguish  carefully  between  the  yields  of  the  fol- 
lowing separate  taxes : 

(1)  The  yield  of  manufacturing  taxes  for  State  purposes. 

(2)  The  yield  of  the  personal  property  tax  of  manufacturing 
corporations  for  local  purposes. 

(3)  The  yield  of  real  estate  taxes  for  local  purposes. 

(4)  The  aggregate  yield  of  manufacturing  taxes,  both  State 
and  local,  for  all  purposes. ' 

In  regard  to  the  yield  of  the  manufacturing  corporations  for 
State  purposes,  we  have  shown  above  that  it  is  insignificant. 
Likewise,  the  yield  of  personal  property  taxes  for  local  purposes 
is  ridiculously  low.  The  yield  of  the  real  estate  tax  for  local 
purposes  represents  a  large  part,  and  in  many  cases  nearly  all, 
of  the  total  contribution  made  by  manufacturing  corporations  for 
all  state  and  local  purposes.  This  fact  is  of  particular  signifi- 
cance for  the  reason  that  only  a  comparatively  small  percentage 
of  the  total  investment  of  manufacturing  corporations  is  found 
in  real  estate.  In  other  words,  a  small  part  of  the  total  invest- 
ment of  manufacturing  corporations  yields  a  very  large  part  of 
the  tax  contribution  of  manufactures.  This  means,  not  that  the 
real  estate  is  taxed  heavily,  but  that  most  of  the  property  escapes. 

U.  8.  Census  Figures.  Inasmuch  as  the  taxes  paid  by  manu- 
facturers in  the  various  localities  are  not  segregated  in  the  records, 
it  is  impossible  to  obtain  anything  like  a  correct  estimate  of  the 
amount  of  taxes  contributed  in  the  year  1914  or  1915  for  all 
purposes.  The  best  estimate  which  we  have  is  that  collected  by 
the  Federal  Census  for  the  year  1909.  In  this  report  the  Census 
Bureau  collected  data  as  to  the  total  taxes  paid  by  manufacturers, 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  127 

both  for  State  and  Federal  purposes,  for  every  state  in  the  Union. 
In  this  investigation  the  manufacturers  were  asked  to  divide  their 
total  tax  contribution  into  (a)  internal  revenue  taxes,  (b)  all  other 
taxes.  The  item  entitled  "  all  other  taxes  "  included  the  total 
taxes  paid  by  manufacturers  for  all  purposes  of  both  state  and 
local  government.  In  1909  the  manufacturers  of  New  York  State 
paid  $10,844,403. 

For  purposes  of  appreciating  the  relative  importance  of  this 
contribution  of  the  manufacturers  it  is  helpful  to  look  at  it  from 
several  points  of  view.  We  may  compare  the  contribution  of 
manufacturers  to  the  total  revenue  receipts  of  the  State,  or  we 
may  compare  the  contribution  of  the  manufacturers  to  the  total 
capital  investment  in  manufactures  in  the  State. 

For  the  purpose  of  these  comparisons  it  would  be  well  if  we 
could  have  the  statistics  under  all  of  these  items  for  the  corre- 
sponding year.  This  it  is  impossible  to  obtain.  However,  we 
have  the  figures  for  these  various  items  for  periods  only  four 
years  apart,  and  they  may  be  used  for  purposes  of  these  compar- 
isons. For  the  year  1912  we  have  a  record  of  the  total  wealth 
of  the  State  of  New  York,  which  is  $25,011,105,223.  For  the 
year  1909  we  have  the  capital  investment  in  manufactures  which 
is  $2,779,496,814.  For  the  year  1913  we  have  the  total  revenue 
receipts  of  the  State,  which  is  $330,622,071.  And  for  the  year 
1909  we  have  the  taxes  paid  by  manufacturing  corporations  as 
stated  above.  In  making  these  comparisons  we  must  compare 
the  capital  invested  in  manufactures  for  the  year  1909  to  the 
total  wealth  in  1912.  The  discrepancy  in  years  is  not  important 
for  two  reasons.  In  the  first  place,  the  capital  investment  in 
manufactures  does  not  include  the  total  capital  investment  in 
manufactures.  The  census  does  not  include  establishments  which 
are  idle  during  the  entire  year  or  had  products  valued  at  less 
than  $500.  It  does  not  contain  securities  and  loans  representing 
investments  in  other  enterprises,  and  it  contained  no  lands  or 
buildings  rented.  In  the  second  place,  the  discrepancy  between 
years  is  not  important  because  after  allowing  a  reasonable  in- 
crease in  the  value  of  the  investment  between  1909  and  1912, 
the  results  for  purposes  of  our  comparisons  are  unappreciable. 

In  comparing  the  taxes  paid  by  manufactures  in  1909  with 
total  revenue  receipts  of  1913,  we  are  possibly  underestimating 


128  STATE  OF  NEW  YORK 

to  a  small  degree  the  percentage  of  total  revenues  contributed  by 
manufacturers.  This  underestimation,  however,  is  so  small  that 
it  loses  its  significance  in  the  comparison  made,  and  moreover  it 
should  be  borne  in  mind  that  the  statistics  of  taxes  paid  by  manu- 
facturers for  the  year  1909  included  "  all  taxes  paid  other  than 
internal  revenue." 

In  comparing  total  taxes  paid  by  manufacturers  to  the  total 
revenue  receipts,  we  find  the  following:  The  total  revenue  re- 
ceipts, for  the  year  1913  were  $330,622,071;  the  total  taxes  paid 
by  manufacturers  in  1909  for  all  purposes,  State  and  local,  were 
$10,844,403,  or  in  other  words,  manufactures  paid  only  3.3  per 
cent  of  the  total  revenue  receipts.  Bearing  this  in  mind,  we  may 
now  compare  the  total  capital  investment  in  manufactures  in  the 
State  of  New  York  to  the  total  wealth  of  New  York.  The  total 
capital  investment  in  manufactures  in  1909  was  $2,779,496,814, 
while  the  total  wealth  in  1912  was  $25,011,105,223.  The  capital 
investment  in  manufactures  was  11.1  per  cent  of  the  total  wealth. 
In  other  words,  while  the  manufacturing -industry  possesses  11.1 
per  cent  of  the  total  wealth  of  the  State,  it  paid  in  taxes  for  all  pur- 
poses only  3.3  per  cent  of  the  total  revenue  receipts.  Assuming 
that  the  ability  of  the  various  classes  of  wealth  to  pay  taxes  was 
roughly  measured  by  their  capital  investment,  the  manufacturers 
should  have  paid  11.1  per  cent  of  the  total  revenue  receipts. 
They  paid,  however,  only  3.3  per  cent  or  less  than  one-third  of 
their  proportional  burden.  In  this  connection  it  should  be  stated 
that  reference  to  the  statistics  published  by  the  Internal  Revenue 
Department  concerning  the  income  tax  yield  of  manufactures  in 
New  York  in  the  year  1914,  would  lead  us  to  think  that  the  1909 
estimate  of  capital  investment  in  manufactures  was  much  below 
the  actual  investment.  If  this  suggestion  is  correct,  the  dis- 
crepancy between  the  percentage  of  taxes  actually  paid  by  manu- 
facturers and  their  proportional  share  upon  the  basis  of  capital 
investment  would  be  even  greater. 

Or,  we  may  look  at  the  matter  in  another  way  by  comparing 
the  percentage  of  capital  investment  paid  in  taxes  by  manufac- 
turers. The  taxes  paid  by  manufacturers  for  all  purposes  in 
New  York,  viz.,  $10,844,403,  is  only  .39  of  one  per  cent  of  the 
capital  investment  in  manufactures  in  the  State.  In  other  words, 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  129 

manufactures  paid  less  than  4  mills  upon  the  dollar,  assuming 
always  that  the  figures  represent  full  valuation  of  the  total  in- 
vestment in  manufactures.  It  should  be  home  in  mind  that  the 
.39  rate  is  not  the  rate  for  State  purposes,  nor  the  rate  for  in- 
tangible personalty,  but  the  average  rate  for  the  total  investment 
including  real  estate  taxes  for  local  purposes. 

We  may  assume  that  the  real  estate  of  manufacturing  corpora- 
tions is  assessed  at  the  same  proportion  of  its  full  value  as  the 
real  estate  of  other  property  owners  in  the  localities.  We  may 
also  assume  that  the  total  -real  estate  investment  of  manufactures 
is  about  one-third  of  the  total  capital  investment.  Under  these 
assumptions  the  total  yield  of  taxes  upon  the  real  estate  of  manu- 
facturers should  at  the  average  State  rate  yield  approximately 
from  $14,000,000  to  $1.5,000,000.  We  know,  however,  that  the 
total  yield  is  less  than  $11,000,000.  Under  these  assumptions 
we  can  come  to  one  or  two  conclusions;  (1)  either  that  manu- 
facturing corporations  are  escaping  entirely  from  taxation  for  any 
purpose  upon  at  least  two-thirds  of  the  capital  invested,  and  even 
upon  that  fraction  are  assessed  at  a  lower  rate  than  that  of  other 
forms  of  wealth,  or  (2)  that  all  property  of  manufacturing  corpo- 
ations  is  grossly  under-assessed  as  compared  to  that  of  other 
forms  of  wealth. 

CHAPTER   V 

YIELD  OF  NEW  YORK  MANUFACTURING  CORPORATIONS  UNDER  THE 
FEDERAL  INCOME  TAX 

In  view  of  the  preceding  estimates  based  upon  the  1909  cen- 
MUS  figures,  it  is  interesting  to  note  the  revenue  possibilities  for 
State  purposes  in  the  light  of  the  yield  of  these  same  sources  for 
Federal  Income  Tax  purposes.  The  statistics  given  by  the  In- 
ternal Revenue  Department  in  regard  to  manufacturing  corpora- 
tions of  New  York  State  are  given  below.  In  comparing  the  two 
:.t  should  be  noted  that  the  Internal  Revenue  statistics  have  to 
do,  not  with  capital  investment  in  manufactures  in  'New  York 
State  as  in  the  case  of  the  census  figures,  but  with  the  capital  in- 
vestment and  income  of  New  York  corporations,  irrespective  of 
whether  the  investment  is  in  New  York  or  in  other  States.  While 
;hey  include  the  total  investment  of  !New  York  corporations  every- 
where, they  at  the  same  time  exclude  the  investment  in  New  York 


130  STATE  OF  NEW  YORK 

manufactures  belonging  to  all  foreign  corporations.  Further- 
more, these  statistics  do  not  include  the  capital  investment  of 
any  New  York  manufacturing  corporation  that  did  not  earn  a 
net  income  in  the  preceding  year.  From  an  examination  of  the 
business  and  financial  statements  of  many  important  corpora- 
tions as  given  in  the  corporation  manuals,  it  appears  that  there 
are  a  large  number  of  manufacturing  corporations  that  are  tem- 
porarily earning  no  net  income  and  therefore  are  not  included 
within  the  Internal  Revenue  figures.  A  further  fact  should  be 
noted,  viz.,  that  a  large  number  of  manufacturing  plants  that 
were  formerly  owned  by  domestic  New  York  corporations  are 
now  owned  by  corporations  whose  domicile  is  in  another  State. 
Much  of  the  property  represented  by  these  corporations  would 
not,  therefore,  be  included  within  the  Internal  Revenue  statis- 
tics. For  these  reasons  it  is  believed  that  the  statistics  given  by 
the  Internal  Revenue  Department  do  not  overestimate  either 
the  actual  capital  investment  of  manufactures  in  New  York 
State  or  the  earning  power  of  the  capital  investment  in  New 
York  State. 

CHAPTER  VI 

NEW  YORK  COMPARED  WITH  OTHER  STATES 
Whenever  it  is  proposed  to  increase  the  tax  burden  of  New 
York  manufacturing  corporations,  we  are  always  met  with  the 
argument  that  an  increase  in  the  tax  burden  will  not  only 
hamper  New  York  manufacturing  corporations  in  their  compe- 
tition with  the  corporations  of  other  States,  but  that  it  will  both 
prevent  new  capital  from  investing  in  the  State  and  drive  pres- 
ent capital  out  of  the  State.  As  indicated  in  another  part  of 
this  report,  it  is  the  belief  of  the  Committee  that  this  argument  is 
utterly  fallacious.  However,  in  order  to  give  the  manufacturing 
industry  the.  benefit  of  the  doubt,  we  may  assume  that  this  argu- 
ment is  sound.  Under  this  assumption  it  is  important,  there- 
fore, to  ascertain  the  relative  burden  borne  by  New  York  manu- 
facturing corporations  and  manufacturing  corporations  of  other 
States.  In  Appendix  E-V  of  this  report  is  given  a  statistical 
tabulation  of  every  State  in  the  Union,  including  the  following 
items : 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  131 

(1)  The  total  wealth  of  each  state. 

(2)  The  capital  invested  in  manufactures  in  each  state. 

(3)  The  total  revenue  receipts  of  each  state. 

(4)  The  taxes  paid  by  manufactures  in  each  state. 

(5)  The  percentage  of  total  wealth  invested  in  manufactures 
in  each  state, 

(6)  The  percentage  of  total  revenue  receipts  paid  by  manu- 
factures in  each  state. 

(7)  The  percentage  of  capital  investment  paid  by  manufactures 
in  taxes  in  each  state. 

An  analysis  of  this  table  brings  out  some  very  interesting 
information.  It  is  worth  while  to  compare  the  tax  burden  of 

w  York  manufacturing  corporations  to  that  of  other  states 
from  several  points  of  view.  From  the  point  of  view  of  percentage 
of  capital  investment  paid  in  taxes  by  manufacturers  in  each 
state,  the  following  is  interesting:  New  York  State  pay  .39  of 
1  per  cent.,  New  Hampshire  pays  .61  per  cent.,  Massachusetts 
pays  .77  per  cent.,  New  Jersey  pays  .39  per  cent.,  Pennsyl- 
vania pays  .28  per  cent.,  Illinois  pays  .39  per  cent,  Michigan 
pays  .73  per  cent.,  California  pays  .41  per  cent.  Other  states 
pay  from  .25  per  cent,  in  Oregon  up  to  .96  per  cent,  in  Mississippi. 
Vv'ith  the  exception  of  Oregon,  Delaware  and  Pennsylvania,  in 
ao  other  states  in  the  Union  do  manufacturers  pay  a  smaller  per- 
3entage  than  New  York  State,  and  with  the  further  exception  of 
N"ew  Jersey  no  other  State  pays  so  small  a  percentage  as  New 
York.  The  percentage  paid  by  manufacturers  in  many  states 
)f  the  Union  is  more  than  twice  as  high  as  that  of  New  York 
State. 

A  comparison  of  the  percentage  of  total  revenue  receipts  paid 
oy  manufactures  in  the  various  states  is  not  as  representative  of 
:he  comparative  abilities  as  the  previous  comparison.  However,  it 
orings  to  light  some  very  interesting  things.  New  York  pays 
3.3  per  cent,  of  the  total  revenue  receipts  of  the  State.  New 
Hampshire  pays  12.2  per  cent.,  Massachusetts,  8  per  cent.,  New 
Jersey  5.5  per  cent.,  Pennsylvania,  5.6  per  cent.,  Illinois,  5 
per  cent,  Michigan,  8  per  cent.,  Wisconsin,  9'.7  per  cent.  In 
Dther  words,  in  no  one  of  the  important  manufacturing  state**, 


132  STATE  OF  NEW  YORK 

do  the  manufactures  pay  so  small  a  percentage  of  the  total  rev- 
enue receipts  as  in  the  State  of  New  York.  In  view  of  the  fact 
that  New  York  State  is  the  leading  manufacturing  state  in  the 
Union,  and  in  view  of  the  fact  that  11.1  per  cent,  of  the  total 
wealth  of  the  State  is  invested  in  manufactures,  this  statement 
is  illuminating. 

In  many  of  the  Western  States  where  manufacturing  is  of 
relatively  small  importance,  the  percentage  of  total  revenue  re- 
ceipts paid  by  manufacturing  corporations  is  of  course  very  small. 
With  the  exception  of  California,  however,  in  no  important  manu- 
facturing state  do  manufactures  pay  so  small  a  percentage  of  total 
revenue  receipts  as  in  New  York. 

A  still  more  interesting  and  more  trustworthy  comparison  is  that 
of  the  ratio  of  the  percentage  of  total  wealth  invested  in  manufac- 
tures to  that  of  the  total  revenue  receipts  paid  by  manufacturers. 
In  no  other  way  is  the  special  privilege  of  New  York  manufac- 
turers in  this  regard  brought  out  so  strikingly.  While  New 
York  State  has  11.1  per  cent,  of  its  total  wealth  invested  in  manu- 
factures it  pays  only  3.3  per  cent,  of  the  total  revenue  receipts. 
New  Hampshire  having  21.6  per  cent,  of  its  capital  investment 
in  manufactures  pays  12.2  per  cent,  of  the  total  revenue  receipts. 
Massachusetts  with  20.3  per  cent,  of  its  total  wealth  invested  in 
manufactures,  pays  8  per  cent,  of  the  total  revenue  receipts.  New 
Jersey  having  17  per  cent,  of  its  wealth  invested  in  manufactures, 
pays  5.5  per  cent.  Pennsylvania  having  17.8  per  cent,  of  its 
wealth  invested  in  manufactures  pays  5.6  per  cent.  Illinois  hav- 
ing 10  per  cent,  invested  in  manufactures  pays  5  per  cent,  of 
the  revenue  receipts.  Michigan  having  10.8  per  cent,  invested  in 
manufactures,  pays  8  per  cent,  of  the  total  revenue  receipts; 
and  Wisconsin  having  13.5  per  cent,  pays  9.7  per  cent.  It  will 
be  noted  that  with  the  possible  exception  of  two  or  three  states, 
the  ratio  of  percentage  of  total  revenue  receipts  paid  by  manu- 
factures to  the  percentage  of  total  wealth  invested  in  manu- 
factures is  greater  throughout  the  United  States  than  in  New  York 
and  in  many  cases  the  manufacturing  industries  pay  more  than 
double  the  proportion  now  paid  by  New  York  State. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  133 

CHAPTER  VII 

SUMMARY  AND  CONCLUSIONS  CONCERNING  THE  TAXATION  OF 
MANUFACTURING  CORPORATIONS 

In  the  first  place,  it  must  be  frankly  admitted  that  it  has 
been  the  policy  of  the  American  commonwealths  to  favor  the 
manufacturing  industry,  as  compared  with  other  forms  of  wealth, 
in  the  matter  of  taxation.  This  policy  has  taken  the  form,  not 
only  of  what  is  equivalent  to  a  lower  rate  of  taxation,  but  also 
in  many  cases  of  an  absolute  exemption  from  taxation.  This 
practice  of  offering  special  privileges  in  the  form  of  tax  exemp- 
tion has  been  especially  common  in  the  New  England  States, 
Pennsylvania  and  a  few  other  states.  It  has  not  been  limited, 
however,  to  these  states,  but  has  been  extended  to  practically 
every  state  in  the  Union.  To  this  extent,  the  policy  of  the  states 
has  been  directed  toward  accomplishing  for  the  industries  within 
the  State  somewhat  the  same  protection  that  has  been  afforded 
by  the  Federal  government  through  the  means  of  the  protective 
tariff  for  American  industries  in  general.  In  each  case  the  pur- 
pose of  the  policy  has  been  to  offer  special  advantages  to  the 
manufacturers  as  opposed  to  their  competitors  in  other  govern- 
mental districts. 

The  reason  why  this  policy  has  been  so  generally  accepted  by 
:he  American  states  is  not  difficult  to  learn.  Nearly  all  of  the 
principal  business  interests  in  any  community  are  benefited  by 
the  development  of  manufactures.  The  construction  of  new 
plants,  with  the  attendant  increase  in  the  laborers  employed  in 
those  plants,  not  only  adds  to  the  value  of  the  real  estate,  but 
adds  to  the  profits  of  the  merchants  of  the  community.  Since 
i  large  number  of  those  influential  citizens  in  any  community 
"Jiat  control  the  policy  of  the  community  are  interested  financially 
in  real  estate  and  in  mercantile  business,  they  have  naturally 
been  very  eager  to  offer  privileges  that  would  attract  the  invest- 
ment of  capital.  In  this  respect  the  introduction  and  develop- 
ment of  manufacturing  industries  in  our  communities  has  followed 
somewhat  the  same  course  as  that  followed  by  transportation  in 
the  middle  and  latter  part  of  the  nineteenth  century.  Just  as 
towns  and  states  vied  with  one  another  in  offering  bonuses  and 

ier  special  privileges  to  the  railroads  for  the  purpose  of  in- 


134  STATE  OF  NEW  YORK 

ducing  the  railroads  to  come  through  their  localities,  so  have 
the  towns  and  states  competed  with  one  another  in  attracting 
capital  of  manufacturers.  From  the  point  of  view  of  the  desira- 
bility of  building  up  communities,  it  is  doubtless  true  that  this* 
policy  of  encouragement,  to  a  certain  extent,  was  justified,  in] 
regard  to  both  the  railways  and  the  manufacturing  industries  of | 
the  community.  The  time  came,  however,  in  the  development  of 
the  railroads  when  the  communities  realized  that  they  had  gone 
entirely  too  far,  and  that  public  policy  demanded  a  more  COH-! 
servative  course.  So  in  the  development  of  manufactures  the 
question  is  now  being  raised  in  many  parts  of  this  country  as  to 
whether  we  have  not  gone  much  farther  than  was  necessary  in 
extending  special  privileges  to  the  manufacturing  industry. 

The  present  inequality  in  the  matter  of  taxation  as  between  the 
manufacturing  industry  and  other  industries  is  very  great.  In- 
deed, it  is  highly  doubtful  that  the  people  ever  intended  that  the 
discrepancy  as  between  the  taxation  of  the  various  forms  of 
wealth  should  extend  to  the  present  extreme.  Whenever  the 
facts  have  become  known  by  the  people  in  general,  there  has 
resulted  a  strong  movement  for  the  readjustment  of  the  tax 
burden. 

In  the  matter  of  inequities  as  between  manufactures  and  other 
forms  of  wealth,  the  situation  is  nowhere  worse  than  in  New  York 
State,  and  this  point  is  of  added  importance  when  we  consider 
the  additional  benefits  that  accrue  to  the  manufacturers  from 
the  great  investment  of  the  State's  wealth  in  barge  canals  and  other 
means  of  transportation. 

In  summing  up  the  injustice  of  the  present  system  of  taxing 
manufactures,  we  may  say: 

First,  it  is  unjust  as  between  manufactures  and  other  forms 
of  wealth. 

Second,  it  is  unjust  as  between  the  various  manufacturing  towns 
of  the  State. 

In  the  third  place,  it  is  unjust  as  between  the  manufacturers 
themselves. 

And  in  this  connection  it  should  be  said  that  we  can  make  no 
progress  in  dealing  with  the  manufacturing  situation  so  long 
as  we  group  under  the  same  term  conditions  of  such  great  va- 
riance as  we  find  in  our  various  manufacturing  communities. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  135 

In  some  communities  the  manufacturing  industry  is  highly  pros- 
perous and  is  able  to  bear  an  important  increase  in  taxation 
without  affecting  in  any  way  its  ability  to  compete  successfully. 

In  other  communities,  however,  the  manufacturing  industries 
are  struggling  to  get  upon  their  feet,  and  an  increased  burden 
at  this  time  would  not  only  be  unjust  to  them,  but  would  be 
highly  unwise  from  the  point  of  view  of  public  revenue.  To 
add  any  burden  to  a  new  industry  before  it  can  be  said  to  be 
well  established,  entirely  apart  from  the  injustice,  would  be  the 
greatest  mistake  that  the  State  could  make.  Such  a  burden 
would  impair  the  capital  from  which  the  State  might  reasonably 
expect  in  the  future  under  right  policy  to  obtain  a  large  revenue. 

In  answering  the  question  whether  the  manufacturing  indus- 
tries of  the  State  in  general  can  afford  to  bear  a  considerable 
increase  in  the  tax  burdens  if  made  upon  a  proper  basis,  we  may 
say,  unquestionably,  it  can.  It  can,  in  the  first  place,  because  of 
the  great  advantages  growing  out  of  public  improvements  con- 
structed at  State  expense.  These  advantages  have  increased  the 
earnings  of  the  manufacturing  corporations  and  have  given  them 
advantages  in  the  matter  of  competition  not  enjoyed  to  an  equal 
extent  by  competitors  from  other  states.  In  the  second  place,  the 
manufacturing  industry  can  afford  to  bear  a  substantial  increase 
of  the  tax  burden  because  as  a  group  they  have  been  and  are 
earning  large  dividends.  The  evidence  of  this  is  found  in  the 
report  of  the  Internal  Kevenue  Department  concerning  the  in- 
come tax. 

In  reply  to  the  question,  by  what  means  should  the  increased 
tax  burden  upon  manufacturers  be  laid,  we  can  say  unquestion- 
ably it  should  be  on  some  basis  other  than  that  of  property. 
Neither  the  cost  basis  nor  the  reproduction  basis  is  fair  for  pur- 
poses of  taxation.  As  pointed  out  in  the  previous  chapters, 
neither  of  these  bases  in  many  cases  forms  anything  like  an  ac- 
curate measure  of  the  ability  of  the  corporation  to  pay  taxes. 
When  manufacturing  corporations  are  taxed  upon  the  property 
basis,  the  only  method  of  valuation  that  approaches  justice  is  that 
of  market  value.  But  to  determine  market  value  involves  a  knowl- 
edge of  the  business  as  a  going  concern.  As  pointed  out  in  the 
previous  chapters,  it  is  utterly  impossible  under  our  present  sys- 
tem for  the  assessor  to  determine  this  value. 


136  STATE  OF  NEW  YORK 

In  the  final  instance  it  is  the  opinion  of  the  Committee,  after 
a  careful  investigation  through  consultation  with  a  large  num- 
ber of  the  principal  manufacturers  in  the  State,  that  the  manu- 
facturing industry  as  a  group  is  thoroughly  willing  to  bear  its 
just  share  of  the  tax  burden.  The  widespread  evasion  which 
has  resulted  to  date  is  a  direct  result  of  the  attempt  to  enforce 
a  most  inequitable  tax.  The  introduction  of  a  fair  tax  would 
be  equally  acceptable,  not  only  to  those  other  forms  of  wealth  now 
bearing  an  unjust  share  of  the  tax  burden,  but  also  to  the  manu- 
facturing industry. 


PART  VIII 
SECTION  182  OR  THE  FRANCHISE  TAX 

All  mercantile  and  miscellaneous  corporations  and  all  manu- 
facturing, laundering  and  mining  corporations,  having  less  than 
40  per  centum  of  their  capital  stock  invested  in  property  in  this 
State  and  used  in  their  laundering,  manufacturing  or  mining 
business  in  this  State,  are  taxable  under  section  182  of  the  Tax 
Law,  more  familiarly  known  as  the  "  franchise  tax."  It  is  a  tax 
payable  annually  for  the  privilege  of  existing  or  doing  business 
in  an  organized  capacity  in  this  State. 

The  tax  is  computed  upon  the  basis  of  the  amount  of  the  capi- 
tal stock  employed  during  the  preceding  year  within  the  State. 
The  amount  of  the  capital  stock  employed  in  the  State  is  measured 
by  the  proportion  which  the  gross  assets  employed  within  the 
State  bear  to  the  gross  assets  of  the  corporation  wherever  em- 
ployed. The  rates  are  as  follows : 

(1)  If  the  dividends  amount  to  6  or  more  than  6  per  centum 
upon  the  par  value  of  the  capital  stock,  one-fourth  of  a  mill  for 
each  one  per  centum  of  dividends  declared  upon  the  par  value 
of  the  capital  stock. 

(2)  If  the  dividends  amount  to  less  than  6  per  centum  on  the 
par  value  of  the  capital  stock,  and 

(a)  The  assets  do  not  exceed  the  liabilities,  exclusive  of  capi- 
tal stock,  or 

(b)  The  average  price  at  which  such  stock  sold  during  said 
year  did  not  equal  or  exceed  its  par  value,  or 

(c)  If  no  dividend  was  declared, 

Then  each  dollar  of  the  amount  of  capital  stock  employed  in 
this  State,  determined  as  hereinbefore  provided,  shall  be  taxed 
at  the  rate  of  three-fourths  of  one  mill. 

(3)  If  such  dividend  or  dividends  amount  to  less  than  six  per 
centum  on  the  par  value  of  the  capital  stock,  and 

(a)  The  assets  exceed  the  liabilities,  exclusive  of  capital  stock, 
by  an  amount  equal  to  or  greater  than  the  par  value  of  the  cap 
ital  stock,  or 

(b)  The  average  price  at  which  such  stock  sold  during  said 
year  is  equal  to  or  greater  than  the  par  value, 


138  STATE  OF  NEW  YORK 

Then  the  amount  of  capital  stock,  determined  as  hereinbefore 
provided  to  be  employed  in  this  State,  shall  be  taxd  at  the  rate 
of  one  and  one-half  mills  on  each  dollar  of  the  valuation  of  the 
capital  stock  employed  in  this  State,  but  such  valuation  shall  not 
be  less  than 

(1)  The  par  value  of  such  stock, 

(2)  The  difference  between  the  assets  and  liabilities,  exclu- 
sive of  capital  stock, 

(3)  The  average  price  at  which  such  stock  sold  during  said 
year. 

Section  182  must  be  read  in  connection  with  section  193  of 
the  Tax  Law,  which,  reads  in  part  as  follows : 

"  If  the  dividend  or  dividends  amount  to  less  than  six  per  cen- 
tum on  the  par  value  of  the  capital  stock,  or  no  dividend  is  de- 
clared, the  president,  treasurer  or  secretary  of  the  company  liable 
to  pay  a  tax  under  the  provisions  of  section  one  hundred  and 
eighty-two  of  this  chapter,  shall,  under  oath,  between  the  first 
and  fifteenth  days  of  November  in  each  year,  estimate  and  ap- 
praise the  capital  stock  of  such  company  at  its  actual  value." 

The  franchise  tax  was  originally  imposed  in  1880.  It  was 
based  largely  on  the  Pennsylvania  system  then  in  existence,  but 
which  has  since  been  abandoned  by  that  State.  Amended  from 
time  to  time,  substantially  the  present  statute  was  passed  in  the 
session  of  1906.  Badly  drawn  in  the  first  place,  the  various 
amendments  have  utterly  failed  to  clear  up  the  ambiguities  of 
this  section,  and  it  has  always  been  fruitful  of  litigation  and  eva- 
sions. Nor  did  the  law  of  1906  materially  improve  the  situation. 
The  original  law  levied  a  tax  upon  the  par  value  of  the  capital 
stock  as  fixed  by  the  State  Board,  making  the  rate  one  and  a 
half  mills  if  the  dividends  were  less  than  six  per  cent,  or  if  there 
were  no  dividends  at  all,  and  one  quarter  mill  for  each  one  per 
cent  of  dividends  if  the  dividends  were  six  per  cent  or  more. 
The  chief  1906  amendments  provided  as  follows : 

1.  The  franchise  tax  was  declared  payable  in  advance. 

2.  The  rule  was  provided  in  the  statute  itself  for  determining 
the  amount  of  capital  stock  employed  within  and  without  the 
State. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  139 

3.  A  method  was  provided  in  the  statute  for  determining  the 
amount  of  capital  stock  employed  within  the  State  represented 
by  stock  in  other  corporations. 

4.  Corporations  paying  less  than  six  per  cent  dividends,  or 
paying  no  dividends,  were  re-classified  in  two  divisions  so  that 
a  different  rate  applied  to  them  as  they  fell  into  one  of  the  other 
classifications. 

This  last  classification  has  caused  the  greatest  confusion  and 
is  generally  held  to  constitute  one  of  the  major  defects.  Corpora- 
tions paying  dividends  of  less  than  six  per  cent  whose  assets  exceed 
the  liabilities  by  an  amount  equal  to  or  greater  than  the  capital 
stock,  or  in  which  the  average  price  of  the  stock  sold  during  the 
year  was  par  or  over,  and  not  included  in  the  classification  pro- 
vided for  in  subdivision  b  (infra)  pay  at  the  rate  of  one  and  one- 
half  mills  on  the  appraised  value,  but  such  appraised  value  shall 
not  be: 

Less  than  the  par  value  of  the  stock,  or 

Less  than  the  difference  between  the  assets  and  liabilities,  or 

Less  than  the  average  price  at  which  the  stock  sold  during  the 
year. 

The  second  subdivision  of  corporations  paying  dividends  of 
less  than  six  per  cent  is  that  class  of  corporations  in  which  the 
average  price  of  the  stock  sold  during  the  year  was  less  than  par, 
or  whose  assets  do  not  exceed  the  liabilities,  exclusive  of  capital 
stock.  In  either  case,  the  tax  to  be  paid  is  three-quarters  of  a 
mill  on  the  appraised  value  of  the  capital  stock.  There  is  no 
minimum  valuation  in  this  class  and  under  the  appraisement  pro- 
vided for  by  section  193  the  tax  may  be  nominal. 

It  probably  was  intended  by  the  framers  of  the  amendment  of 
1906  to  take  into  account  a  minimum  valuation  of  par  for  this 
class  of  corporations,  but  the  statute  did  not  clearly  express  it, 
and  after  the  amendment  of  section  193  it  was  decided  in  People 
ex  rel  N.  Y.  Mail  &  Trans.  Co.  v.  Gaus,  198  K  Y.  250,  that 
the  valuation  referred  to  in  this  part  of  section  182  by  the  words 
"  each  dollar  of  the  amount  of  capital  stock  employed  in  this 
state  "  was  the  appraised  valuation  provided"  by  section  193. 

Another  point  of  ambiguity  which  has  given  rise  to  litigation 


14:0  STATE  OF  NEW  YORK 

is  where  corporations  pay  dividends  of  less  than  six  per  cent  and 
fall  under  one  alternative  subdivision  of  the  second  paragraph 
of  section  182  requiring  it  to  pay  the  rate  of  three-quarters  of 
a  mill  and  also  an  alternative  subdivision  of  the  third  paragraph 
or  class  of  section  182  providing  for  the  rate  of  one  and  one-half 
mills.  Under  these  circumstances,  the  practice  in  the  State 
Comptroller's  office  had  been  to  assess  at  the  higher  rate.  The 
legality  of  this  practice  was  attacked  in  People  ex  rel.  American 
Bank  Note  Co.  v.  Sohmer,  157  A.  D.  1,  and  the  court  held  that 
since  the  reading  of  the  statute  discloses  an  inconsistency  under 
the  general  principles  of  interpretation,  the  taxpayer  was  en- 
titled to  the  most  favorable  reading  and  the  common  stock  of  the 
corporation  in  the  case  mentioned  should  be  taxed  at  the  three- 
quarters  mills  rate. 

Under  the  interpretation  placed  on  the  statute  in  the  New 
York  Mail  &  Trans.  Co.  case,  many  corporations  escape  entirely 
from  taxation  since  their  indebtedness  exceeds  their  assets.  Many 
corporations  under  this  decision  pay  a  nominal  tax.  On  examin- 
ing the  Treasurer's  report  for  1914,  out  of  the  first  4,800  cor- 
porations, 2,079  pay  a  tax  of  less  than  $5,  out  of  the  next  4,903 
corporations  in  the  report,  2,043  pay  a  tax  of  less  than  $5.  The 
average  tax  paid  by  these  corporations  paying  less  than  $5  is 
somewhat  less  than  $2.  It  would  not  be  unfair  for  corporations 
whose  capitalization  was  $20,000  or  less  to  pay  no  tax  less  than 
$5  no  matter  what  its  appraisement  might  be,  and  no  corpora- 
tion whose  capitalization  was  over  $20,000  should  pay  a  tax  of 
less  than  $10  a  year,  no  matter  what  its  appraisement  might 
be.  This  simp1^  amendment  would  bring  from  $50,000  to  $100,- 
000  additional  tax  into  the  treasury  every  year.  As  it  stands  to- 
day, it  does  not  pay  to  audit  or  make  out  bills  in  40  per  cent  of 
these  cases. 

These  are  some  of  the  principal  defects  in  the  wording  of  the 
franchise  tax,  but  the  who'le  section  is  so  confused  and  misunder- 
stood that  no  mere  amendments  can  cure  it.  We  cannot  do  better 
in  this  connection  than  to  quote  the  testimony  of  Deputy  State 
Tax  Commissioner  John  J.  M,erril,  for  over  21  years  chief  of 
the  Bureau  of  Corporations,  and  who  is  reputed  to  be  the  only 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  141 

man  in  the  State  who  understands  this  law.  He  testified  as 
follows : 

"  Section  182  as  it  is  written  and  construed,  I  do  not  believe 
is  understood  by  a  score  of  lawyers  in  the  State  of  New  York, 
and  of  course  it  is  understood  less  by  the  taxpayers.  It  is  am- 
biguous, prolix  and  as  construed  does  not  get  anywhere;  and  it 
is  open  to  all  kinds  of  evasions  *  I  think  it  has  been  a 

burning  disgrace  that  the  Legislature  of  the  great  State  of  New 
York  has  allowed  this  thing  to  go  on  impossible  of  administra- 
tion; I  will  say  frankly,  with  all  the  years  of  time  that  I  have 
put  on  it,  there  are  plenty  of  cases  that  it  cannot  be  applied  to, 
that  if  it  should  ever  come  to  the  courts  for  review,  they  will  be 
vacated.  I  would  not  want  to  suggest  what  kind  or  character 
in  this  public  meeting,  because  it  would  not  be  proper.  And  it 
is  not  at  all  surprising  that  good  lawyers,  men  of  ability  who  can 
sit  down  and  distinguish  between  two  sets  of  conditions,  neces- 
sarily mislead  their  clients  in  making  their  reports.  I  say  that 
is  a  burning  shame." 

But  assuming  that  existing  ambiguities  be  eliminated  and  that 
the  law  be  so  worded  as  to  accomplish  what  was  intended,  it 
would  still,  in  our  judgment,  be  defective.  Class  I,  or  corpora- 
tions paying  six  per  cent  dividends  or  over  are  taxed  one-quarter 
for  each  one  per  cent  of  dividend  on  par  value  of  capital  stock. 
This  is  for  all  purposes  a  tax  on  dividends  and  open  to  the  ob- 
jections that  can  be  urged  to  such  a  tax,  the  principal  one  of 
which  is  that  it  readily  permits  evasion  through  the  medium  of  a 
small  stock  issue  and  a  large  bonded  indebtednes.  In  other 
words,  it  tends  to  encourage  financing  by  means  of  bonded  indebt- 
edness, which  is  not  desirable  from  the  standpoint  of  sound  busi- 
ness finance.  Nor  does  it  produce  revenue  commensurate  with  the 
corporation's  ability  to  pay. 

Class  II,  or  corporations  whose  assets  exceed  the  liabilities 
exclusive  of  capital  stock  by  an  amount  equal  to  or  greater 
than  the  par  value  of  the  capital  stock,  or  the  average  price 
of  whose  stock  during  the  year  is  equal  or  greater  than  the  par 
value,  are  taxed  at  the  rate  of  one  and  one-half  mills,  (1)  on  the 
value  of  the  capital  stock,  or  (2)  the  difference  between  the  assets 
and  the  liabilities  exclusive  of  capital  stock,  or  (3)  the  average 


14:2  STATE  OF  NEW  YORK 

price  at  which  such  stock  sold  during  the  year.     Let  us  consider 
each  one  of  these  methods  of  valuation  separately. 

1.  The  par  value  of  the  stock.     Here  again  bonded  indebted- 
ness offers  a  serious  difficulty.     The  interest  on  the  indebtedness 
may,  in  the  first  place,  have  reduced  the  dividends  below  the  six 
per  cent  class.    And,  in  the  second  place,  the  par  value  does  not 
represent  either  the  capital  invested  in  the  business  which  con- 
sists of  both  stock  and  bond  investment  and  surplus,  or  the  earning 
capacity  of  the  property  measured  by  the  actual  amount  of  the 
investment. 

2.  The  difference  between  the  assets  and  liabilities,  exclusive 
of  capital  stock.     This,  of  course,  tends  to  correct  some  of  the 
above-mentioned  objections  to  (1)  and  was  so  intended.     Thus  it 
takes  care  of  the  surplus.    But  it  does  not  solve  the  bond  difficulty. 
And  it  involves,  furthermore,  the  very  grave  difficulties  of  valuing 
assets,  some  of  which  have  been  described  in  discussing  property 
taxation. 

3.  The  average  price  at  which  the  stock  sold  during  the  year. 
This  is  inseparably  connected  with  the  outstanding  funded  debt; 
and  secondly,  market  value  is  too  dependent  on  the  speculative 
factor  of  stock  manipulation  to  make  it  an  accurate  basis  of 
valuation.    Moreover,  any  number  of  stocks  not  listed  on  the  Stock 
Exchange  have  no  readily  ascertainable  market  value. 

Class  III. —  Corporations  which  would  fall  under  the  mini- 
mum tax  on  par  value.  This  is  open  to  the  objections  already 
enumerated  in  our  discussion  of  par  value  valuation.  It  is,  never- 
theless, justifiable  as  a  fair,  if  arbitrary,  method  of  imposing  a 
minimum  tax  on  all  corporations  for  the  privilege  of  doing  busi- 
ness in  corporate  form. 

In  conclusion,  we  are  of  opinion  that  the  corporation  tax  on 
a  dividend  capital  stock  basis  is  complicated  and  unscientific,  in 
that  it  fails  to  establish  an  accurate  measure  of  the  corporation's 
ability  to  pay;  and  that  a  net  earnings  tax  is  not  only  more 
desirable  from  a  taxation  standpoint,  but  from  that  of  revenue 
productivity  as  well. 


PART  IX 
THE  LISTING  SYSTEM 

Before  taking  up  the  various  substitutes  for  the  personal  prop- 
erty tax,  we  desire  to  deal  with  the  attempts  which  have  been 
made  actually  to  enforce  the  present  system. 

Every  state  in  the  Union,  except  New  York  State,  has  had  the 
listing  system.  It  has  been  common  with  those  acquainted  only 
with  the  Xew  York  system  of  taxation,  to  suppose  that  the  failure 
to  collect  the  personal  property  tax  in  New  York  was  due  to  the 
lack  of  the  listing  system. 

An  examination,  however,  of  the  results  in  the  states  which 
have  the  listing  system  discloses  in  some  of  them  a  condition 
much  worse  than  has  ever  existed  in  ]STew  York. 

According  to  the  laws  of  these  States,  every  taxpayer  is  re- 
quired to  fill  out  a  minute  inventory,  not  only  of  all  his  furniture 
and  other  tangible  personalty,  but  also  of  all  his  intangible  per- 
sonalty. Penalties  for  failure  to  list  property  are  of  great 
severity.  The  most  stringent  laws  have  been  passed  to  enable  the 
assessors  to  enforce  the  complete  listing  of  property.  The  assessors 
have  had  every  power  necessary  to  inquire  into  and  to  gain  knowl- 
edge of  the  ownership  of  personalty.  Every  inducement  has  been 
offered  to  the  assessors  and  to  private  citizens  to  ferret  out  per- 
sonal property.  Various  states  have  had  tax  ferrets  and  boards  of 
inquisition,  back-tax  commissions,  etc.,  and  have  paid  at  times 
commissions  amounting  to  a  large  part  of  the  tax  collected,  yet 
in  every  case  (with  the  exception  of  one  or  two  temporary  suc- 
cesses) the  result  has  been  failure  to  secure  honest  and  complete 
listing.  Most  of  the  states  require  that  the  statements  shall  be 
filed  under  oath,  and  although  these  statements  are  sworn  to,  the 
greatest  lack  of  uniformity  in  this  regard  exists  as  between  state 
and  state  and  as  between  localities.  The  most  notable  result  ob- 
tained from  these  drastic  measures  has  been,  not  the  listing  of  a 
large  proportion  of  intangible  personalty,  but  widespread  perjury. 

The  reports  of  practically  every  tax  commission,  that  has  in- 
vestigated the  problem  disclose  the  same  results,  viz.,  that  the 
listing  system  in  itself  is  not  a  remedy  for  the  present  difficulty 


144  STATE  OF  NEW  YORK 

with  the  personal  property  tax.  The  following  quotations  from 
various  reports  are  sufficient  to  establish  this  contention  beyond 
controversy : 

The  Oregon  Special  Tax  Commission  reports  as  follows: 

"  Where  the  general  property  tax  has  been  retained,  it 
has  been  sought  to  reach  personal  property  by  an  exhaustive 
listing  system,  whereby  the  taxpayer  is  compelled  to  prac- 
tically assess  himself  by  furnishing  a  detailed  list  of  all 
species  of  personal  property  owned  by  him.  The  system  in 
practice  has  not  been  effective.  It  results  in  evasion  and 
deception;  it  is  not  calculated  to  reach  intangible  personal 
property.  *  *  It  works  a  great  hardship  upon  the 

person  who  honestly  lists  his  property." 

The  1906  Washington  Commission  reports  as  follows: 

"  This  is  the  lesson  of  all  history.  The  oath  to  make  a  full 
and  complete  return  is  as  sacred  as  the  oath  taken  by  the 
juror,  etc.  How  well  it  is  observed  can  be  gleaned  from 
the  foregoing  pages.  The  oath  is  a  failure." 

The  Commission  cites  the  experience  of  other  States  that  have 
attempted,  by  drastic  laws,  penalties  and  the  informing  system, 
to  enforce  the  assessment  of  intangible  property.  It  reports  that 
in  no  case  has  the  system  been  successful. 

The  1907  New  York  Special  Tax  Commission  sums  up  the 
situation  as  follows: 

"  Two  schemes  have  been  discussed  by  the  members  of 
this  Commission  to  remedy  the  present  evils  of  the  personal 
property  tax.  One  of  these  consists  in  an  attempt  to  retain 
the  present  personal  property  tax,  but  to  make  its  admin- 
istration more  rigorous,  and  to  require  some  form  of  listing. 
To  your  undersigned  Commissioners,  this  plan  scarcely 
merits  any  further  consideration  at  all. 

"  To  any  one  who  is  acquainted  with  the  history  of  per- 
sonal property  taxation  in  the  various  commonwealths  of 
the  United  States  or  the  different  countries  of  Europe,  such 
a  proposition  must  seem  entirely  out  of  place.  Every  pos- 
sible attempt  has  been  made  to  enforce  the  personal  property 
tax. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  145 

"  We  have  had  lenient  measures  and  listing  bills ;  self- 
assessments  and  official  assessments,  general  i  tax  inquisitors  ' 
and  '  tax  ferrets.'  We  have  had  taxation  of  debts  and 
exemption  of  debts.  It  needs  no  argument  in  this  place  to 
prove  what  is  universally  acknowledged  by  all  careful  students 
of  the  problem  that  a  tax  on  personal  property  cannot  succeed 
under  any  conceivable  method  of  administration.  The  root 
of  the  difficulty  lies  in  the  fact  that  personal  property  legally 
follows  the  residence  of  the  owner,  and  that  it  is  impossible 
to  localize  intangible  personalty.  *  *  *. 

"  The  sole  result  of  increasing  the  rigor  of  the  law  will  be 
here,  as  it  ha?  always  been  elsewhere,  to  augment  perjury 
instead  of  revenue  and  to  breed  more  inequality  while  aiming 
at  greater  justice.  Xo  law,  however  carefully  devised,  can 
enforce  a  system  which  is  out  of  harmony  with  the  economic 
facts.  The  personal  property  tax  has  become  an  anachronism 
find  is  hence  unworkable  under  any  possible  administrative 
method  in  our  modern  industrial  centres. 

"  We,  therefore,  brush  aside  as  undeserving  of  any  serious 
consideration,  the  proposition  to  remedy  the  present  evils 
of  personal  property  taxation,  by  attempting  to  make  the 
law  more  rigorous." 

One  of  the  most  drastic  laws  on  any  statute  book  was  the  former 
law  of  Ohio,  since  much  softened.  The  Kentucky  law  is  a  good 
second  to  that  of  Ohio  for  the  severity  of  its  language.  If  any 
law  could  compel  the  owners  of  intangible  property  to  make  a 
return  of  their  holdings  and  to  pay  a  tax  amounting  to  one-third 
or  one-half  of  the  income  therefrom,  it  would  seem  that  the  old 
tax  law  of  Ohio  could  compel  them  to  do  so. 

For  many  years  that  State  required  all  taxpayers  to  make  a 
return  of  their  personal  property  "  according  to  its  value  in 
money,"  and  this  statement  had  to  be  made  under  oath.  More- 
over, the  law  authorized  any  county  auditor  to  summon  recal- 
citrant citizens  before  a  judge  of  the  probate  court,  and  made 
it  the  duty  of  such  judge  to  punish  the  citizen  for  contempt  if 
he  refused  to  answer  any  question  which  the  auditor  might  ask 
concerning  his  personal  property  subject  to  taxation.  Nor  was 
this  all. 


146  STATE  OF  NEW  YORK 

The  auditor  might  summon  any  other  person,  including  the 
cashier  of  any  bank,  which  he  might  suppose  to  have  knowledge 
of  any  taxpayer's  affairs,  and  might  compel  him  to  testify  under 
oath.  Such  an  investigation  might  extend  hack  over  a  period  of 
five  years;  and  the  law  provided  that  in  case  of  proved  evasion 
or  false  statement  five  years'  back  taxes  might  be  collected,  with 
an  addition  of  50  per  cent  as  a  penalty.  When  we  remember 
that  the  average  tax  rate  in  Ohio  until  very  recently  was  2%  per 
cent  of  the  capital  value  of  taxable  property,  it  will  seem  that, 
with  the  penalty  included,  the  amount  that  might  be  recovered 
from  a  man  who  evaded  taxes  for  a  period  of  five  years  amounted 
to  no  less  than  18.75  per  cent  of  the  entire  value  of  his  property. 

Under  such  a  law  it  was  discovered  twenty-five  years  ago  that 
the  assessment  of  personal  property  was  decreasing  not  only  rela- 
tively, but  absolutely.  In  1887  the  Governor  of  Ohio  sent  to 
the  Legislature  a  special  message  dealing  with  the  question  of  tax- 
ation. "  Personal  property ",  he  said  "  is  valued  all  the  way 
from  full  value  down  to  nothing.  In  fact,  the  great  majority 
of  the  personal  property  of  the  state  was  not  returned,  but  en- 
tirely and  fraudulently  withheld  from  taxation.  So  far  as  per- 
sonal property  is  concerned  the  fault  is  chiefly  with  the  people 
who  list  their  property  for  taxation.  The  idea  seems  largely  to 
prevail  that  there  is  injustice  and  inequality  in  taxation  and 
that  there  is  no  harm  in  cheating  the  State,  although  to  do  so  a 
false  return  must  be  made  and  perjury  committed.  This  offense 
against  the  State  and  good  morals  is  too  frequently  committed  by 
men  of  wealth,  and  reputed  high  character,  and  of  corresponding 
position  in  society." 

To  remedy  the  conditions  thus  disclosed  the  Legislature  ex- 
tended to  all  parts  of  the  State  a  device  which  had  been  tried 
previously  in  a  few  counties.  It  was  provided  that  the  county 
officials  might  employ  agents  to  ferret  out  property  escaping  taxa- 
tion, and  these  agents  known  as  tax  inquisitors,  similar  to  the 
revenue  agents  in  Kentucky,  were  to  receive  as  compensation  a 
part  of  the  taxes  recovered  through  their  efforts. 

Under  the  operation  of  this  enlightened  and  civilized  law, 
some  millions  of  personal  property  were  uncovered  and  placed 
upon  the  tax  rolls;  but  this  effect  was  merely  temporary,  since 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  147 

many  wealthy  persons  were  driven  out  of  the  State  and  their  per- 
sonal property  was  thereby  placed  beyond  reach.  Many  citizens 
of  Ohio  at  this  time  took  up  residences  in  the  city  of  Washington, 
others  moved  to  New  York;  and  it  is  disputed  by  no  one  that 
the  effect  of  the  tax  inquisitors  law  was  to  drive  capital  out  of 
the  State.  In  many  cases  the  law  is  reported  to  have  led  to 
extensive  blackmail;  and  it  is  a  matter  of  common  knowledge 
that  persons  with  sufficient  political  influence  were  able  to  secure 
immunity  from  the  tax  inquisitors. 

The  conditions  have  been  aptly  described  by  the  Ohio  Com- 
mission of  1893 : 

"  It  must  be  perfectly  apparent  that  we  do  not  succeed  in 
getting  upon  the  duplicate  any  appreciable  part  of  the  personal 
property  which  is  not  tangible  and  which  is  not  in  sight 
The  system  as  it  is  actually  administered  results  in 
debauching  the  moral  sense.  It  is  a  school  of  perjury.  It  sends 
large  amounts  of  property  into  hiding.  It  drives  capital  in  large 
quantities  from  the  State." 

More  significant  still  are  the  figures  which  show  the  amount 
of  intangible  property  assessed  under  Ohio's  severe  laws. 

TABLE  SHOWING  THE  ASSESSED  VALUE  OF  INTANGIBLE  PROPERTY  IN  OHIO 

Year  Money  Credits                         Securities  Total 

1881 $40,  600,  000  $101,  100,  000  $8,  600, 000  $150,  300,  000 

1893 41,600,000  111,200,000           9,700,000  162,500,000 

1906 59,  900,  000  77,  200, 000  10,  800,  000  147,  900,  000 


From  1910  to  1914,  if  we  exclude  the  $300,000,000  assessed 
against  one  individual  which  cannot  be  collected  because  he  is 
a  resident  of  the  state  of  New  York,  the  percentage  of  the  assessed 
value  of  personal  property  owned  by  individuals  to  the  total 
assessment  of  the  State  actually  decreased  from  14.5  per  cent  to 
11.5  per  cent,  and  this  in  spite  of  a  new  system  whereby  county 
assessors  appointed  by  the  Governor  made  the  assessment, —  a 
system  admittedly  more  effective  from  the  administrative  stand- 
point. 

In  Kentucky,  after  the  most  vigorous  efforts  had  been  made 
through  a  listing  system  to  reach  personal  property,  the  Special 


148  STATE  OF  NEW  YORK 

Tax  Commission  of  1914  found  that  "  the  state  of  Kentucky 
received  more  revenue  from  its  dogs  than  it  did  from  all  the 
bonds,  moneys  and  stocks  in  the  State." 

A  story  told  the  Committee  by  one  of  the  witnesses  well  illus- 
trates the  workings  of  the  listing  system.  It  seems  that  a  college 
professor  went  from  New  York  to  Michigan,  to  a  small  college 
town.  He  took  his  household  goods  and  family  along,  and  when 
he  was  handed  one  of  the  listing  blanks,  took  it  seriously  and 
conscientiously  filled  it  out.  As  it  turned  out,  not  only  was  his 
the  highest  assessment  of  anybody  in  the  town,  but  he  was  ac- 
tually assessed  for  more  personal  property  than  everybody  else 
together  in  the  town.  The  town  council,  horrified  at  this  treat- 
ment of  a  stranger  within  their  gates,  actually  appropriated 
enough  money  to  reimburse  him,  so  that  his  levy  would  not  ex- 
ceed the  general  average. 

The  New  York  Commission  of  1872  refers  to  this  system  as 
"  a  method  of  procedure  which  has  no  parallel  except  in  the 
records  of  the  Middle  Ages  and  of  the  Inquisition,  and  consti- 
tutes, in  itself,  a  satire  of  any  claim  to  wholly  free  and  enlightened 
government." 

But  there  is  no  need  to  continue  to  dwell  on  the  shortcomings 
of  the  listing  system.  We  are  of  opinion  that  it  cannot  be  made 
to  succeed;  that  its  adoption  would  be  highly  detrimental  to  the 
jest  interests  of  the  State;  that  it  is  contrary  to  all  our  tradi- 
tions, and  that  public  opinion  would  not  sanction  its  adoption. 


PART  X 

MISCELLANEOUS   BUSINESS   TAXES 

One  of  the  projects  brought  to  the  attention  of  the  Committee 
was  the  imposition  of  a  number  of  stamp  taxes  on  bank  checks, 
bills  of  exchange,  legal  instruments,  telephone  communications, 
telegraph  messages,  etc.  Such  a  proposition  falls  squarely  into 
the  category  of  new  sources  of  revenue  for  state  purposes. 

In  this  connection  we  desire  to  reiterate  what  we  have  already 
stated  in  our  introduction:  That  the  Committee  does  not  under- 
stand that  it  was  appointed  with  a  view  to  developing  new  sources 
of  revenue  for  the  purposes  of  the  State  government,  but  rather  to 
report  "  the  best  methods  of  equitably  and  effectually  reaching 
all  property  which  should  be  subjected  to  taxation  ",  an  investi- 
gation in  which  the  question  of  additional  revenue  is  only  inci- 
dental. The  imposition  of  new  and  miscellaneous  indirect  taxes 
which,  while  yielding  additional  revenue,  would  not  reach  the 
great  mass  of  personal  property  now  escaping  taxation,  or  equalize 
the  relative  burden  borne  by  different  classes  of  taxpayers  and 
different  forms  of  property,  would  not,  in  our  judgment,  meet 
the  problem  submitted  to  your  Committee  for  solution. 

Moreover  our  study  has  resulted  in  the  conclusion  that  the 
problem  has  become  acute  in  the  localities  rather  than  in  the  state 
budget.  Two-thirds  of  all  taxes  are  devoted  to  local  purposes, 
while  by  far  the  greater  proportion  of  future  needs  are  likely  to 
be  local  in  character.  The  State  enjoys  a  considerable  revenue 
from  indirect  taxes.  These  are,  generally  speaking,  satisfactory 
in  character,  and  can,  if  the  necessity  arises,  be  supplemented  by 
a  direct  tax,  which  would  never  exceed  a  small  fraction  of  the 
total  direct  tax  for  local  and  State  purposes.  The  localities, 
however,  must  rely  for  the  most  part  on  direct  taxation,  which  we 
have  seen  falls  almost  entirely  upon  one  class  of  property.  We 
are  inclined  to  believe  that  any  new  indirect  taxes  should  be  for 
local  rather  than  for  state  purposes,  and  the  miscellaneous  taxes 
suggested  are  for  the  most  part  unsuited  to  such  a  purpose. 

Nevertheless,  the  Committee  has  investigated  these  miscellane- 
ous taxes,  both  as  imposed  by  the  Federal  government  and  as  im- 
posed by  European  countries,  and  has  endeavored  to  ascertain  the 
probable  yield  of  such  taxes  if  imposed  in  the  State  of  !New 


150  STATE  OF  NEW  YORK 

York.     The  results  of  these  investigations  will  be  found  in  the 
appendix. 

Some  of  the  more  serious  objections  to  the  imposition  of  these 
taxes  are  as  follows: 

(1)  It  is  obvious  that  the  yield  would  be  small,  unless  the 
rates  were  so  high  and  the  subjects  of  taxation  so  numerous  as 
to  result  in  a  serious  burden  upon  the  business  interests  of  the 
State. 

(2)  Formerly  only  used  as  emergency  war  measures,   these 
taxes  apparently  are  to  be  relied  on  more  and  more  by  the  Fed- 
eral government. 

(3)  Not  even  from  a  revenue  standpoint  their  imposition  would 
in  no  sense  solve  the  personal  property  problem.     Assume  that 
the  yield  would  be  four  or  five  millions.     The  personal  property 
tax  yields  to-day  somewhat  in  excess  of  six  and  a  quarter  millions 
of  dollars.    If  it  were  abolished  and  the  new  taxes  returned  to  the 
localities,  the  latter  would  be  no  better  off  than  they  are  to-day, 
in  fact  somewhat  worse  off.     Moreover,  real  estate  would  have  to 
pay,  even  to  a  greater  extent  than  under  the  present  system,  all 
future  increases  in  the  cost  of  government. 

(4)  If  the  new  taxes  were  retained  by  the  -State  for  state  pur- 
poses, it  is  quite  true  that  they  could  be  used  to  reduce  the  amount 
of  any  future  direct  tax  that  might  have  to  be  imposed.   There  is, 
however,  very  grave  doubt  as  to  the  wisdom  of  the  further  de- 
velopment of  the  separation  of  State  and  local  revenues  by  the 
imposition  of  new  indirect  taxes.     Experience  has  shown  that 
where  local  and  state  revenues  are  separated  and  indirect  taxes 
supplant  a  direct  State  tax,  in  the  course  of  a  very  few  years  the 
yield  of  the  former  is  exhausted  and  the  State  is  compelled  to  re- 
turn to  the  direct  tax  under  conditions  by  no  means  as  favorable  as 
those  which  existed  at  the  time  of  its  abolition.     The  truth  is, 
that  indirect  taxes  are  not  as  severely  felt  as  the  direct.     The 
indirect  are  open,  therefore,  to  the  charge  of  leading  to  extrava- 
gance, rather  than  economy. 

(5)  To  superimpose  these  new  forms  of  indirect  taxation  upon 
our  present  heterogeneous  system  might  temporarily  alleviate,  but 
might  also  postpone  and  would  eventually  impede  a  proper  solu- 
tion of  the  already  confused  problem  which  demands  immediate 
action,  rather  than  temporizing. 


PART  XI 

SOME    FORMS    OF    CORPORATE    TAXATION    FOUND    IN 

OTHER  STATES 

1.  The  Franchise  Tax  Based  on  the  Par  Value  of  Capital 
Stock,  Such  as  is  Found  in  New  Jersey.  The  objections  to  a 
tax  based  on  par  value  have  all  been  discussed  in  connection  with 
our  analysis  of  section  182.  While  the  tax  is  readily  ascertain- 
able,  the  par  value  of  the  stock  bears  no  direct  relationship  to 
the  actual  value  of  the  property  of  the  corporation,  nor  to  its 
earning  ability.  Moreover,  a  small  capitalization  and  a  large 
bond  issue  make  this  method  of  taxation  easy  of  evasion. 

(2)  The  Capital  Stock  Tax,  Such  as  is  Found  in  Pennsyl- 
vania, where  the  capital  stock  is  appraised  "  at  its  actual  value 
in  cash,  not  less,  however,  than  the  average  price  which  said  stock 
sold  for  during  said  year,  and  not  less  than  the  price  indicated 
or  measured  by  net  earnings  or  by  the  amount  of  profits  made 
and  either  declared  in  dividends  or  carried  into  surplus  or  sink- 
ing funds."  This  tax  has  been  described  as  follows:  (See 
"  Brief  History  of  Taxation,"  1906,  p.  66). 

"  The  tax  on  the  capital  stock  of  a  corporation  is  a  tax 
on  its  property  and  assets  and  franchises.  The  corpora- 
tion is  simply  a  trustee  for  its  stockholders,  and  they  are 
the  real  owners  of  the  property,  and  whether  the  property 
is  taxed  in  the  name  of  the  corporation  or  in  the  name  of 
the  shareholders,  the  ultimate  burden  falls  on  the  same  per- 
sons. The  fact  that  the  tax  is  called  a  tax  on  capital  stock 
is,  therefore,  not  of  the  essence  of  the  matter;  whatever  it 
is  called,  it  is  a  tax  on  the  property  and  assets  of  the  share- 
holders for  whom  the  corporation  is  simply  trustee.  The 
tax  is  a  tax  on  its  property  and  assets,  including  its  fran- 
chise, and  the  question  of  the  actual  value  in  cash  is  a 
question  of  fact  which  must  be  determined  by  considering 
value  of  its  tangible  property  and  assets  of  every  kind,  in- 
cluding its  bonds,  mortgages  and  moneys  at  interest,  and  its 
franchises  and  privileges;  and  the  amount  of  the  encum- 
brances on  its  property  and  franchises  is  also  a  relevant  fact 


1 52  STATE  OF  NEW  YOKK 

to  be  considered,  but  is  riot  to  be  specifically  deducted  from 
the  valuation  so  ascertained  and  determined,  and  the  Su- 
preme Court  has  held,  in  the  case  of  Commonwealth  v.  N. 
Y.,  P.  and  0.  R.  R.,  188  Pa.  State  169,  that  it  would  be  a 
manifest  error  to  hold  that  the  debt  should  be  deducted  from 
the  aggregate  value  of  the  property,  and  thereby  withdraw 
tangible  property  to  that  extent  from  taxation." 

Professor  Seligman,  in  his  "  Essays  on  Taxation,"  page  240, 
after  describing  the  method  of  appraisal  of  the  Pennsylvania 
capital  stock  tax  quoted  above,  has  this  to  say : 

"  This  has  led  to  much  litigation.  It  has  been  decided, 
for  instance,  that  the  price  at  which  the  shares  sell  in  the 
market  is  not  conclusive;  and  in  a  more  general  way  that 
the  actual  value  in  cash  is  to  be  determined  by  '  considering 
the  value  of  the  tangible  property,  the  amount  of  its  busi- 
ness, the  rate  of  dividends  declared,  and  the  extent  and 
value  of  its  good  will,  franchises,  and  privileges,  as  indi- 
cated by  the  evidence  bearing  upon  those  subjects  at  that 
particular  time.'  The  result  is  that  in  practice  the  taxation 
of  capital  stock,  by  such  a  method  of  appraisal,  does  not 
differ  much  from  the  ad  valorem  system  mentioned  below." 

Under  this  system  the  full  value  of  corporate  property,  includ- 
ing franchise  value,  is  sought,  the  law  undertaking  to  lay  down 
certain  definite  rules  to  be  used  in  ascertaining  the  value  of  the 
said  property.  It  differs  from  the  ad  valorem  system  to  the  ex- 
tent that  it  takes  into  consideration  such  important  factors  as  net 
earnings,  dividends  and  profits  carried  into  surplus. 

If  the  tax  is  to  be  levied  on  the  capital  stock,  the  value  of 
which  is  to  be  based  on  net  earnings,  it  is  hard  to  see  what  ad- 
vantages accrue  from  a  capital  stock  tax  as  contrasted  with  a  tax 
on  net  earnings.  If,  on  the  other  hand,  in  addition  to  net  earn- 
ings, the  assessors  must  take  into  consideration  the  value  of  the 
tangible  and  intangible  property,  they  are  compelled  to  deal  with 
all  the  objectionable  elements  and  serious  difficulties  connected 
with  property  taxation.  It  may  be  urged  that  a  capital  stock  tax 
provides  for  the  contingency  when  there  are  no  net  earnings,  in 
which  event  under  the  net  earnings  system  the  corporation  would 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  153 

not  pay  taxes.  It  must  be  remembered,  however,  that  the  cor- 
porations would,  in  any  event,  pay  a  tax  on  their  real  property, 
and  it  is,  to  say  the  least,  doubtful  whether  a  corporation  with- 
out earnings  has  real  taxpaying  ability.  Whatever  may  be  true 
of  public  service  corporations  which  enjoy  peculiar  privileges,  we 
believe  that  in  so  far  as  general  business  corporations  are  con- 
cerned, it  is  fairer  and  on  the  whole  better  public  policy  to  tax 
them  on  a  net  earning  basis,  and  to  require  them  to  pay  taxes 
only  when  they  have  the  income  from  which  to  pay  them. 

N.  B. — Capital  stock  tax  does  not  apply  to  manufacturing  corporations  in 
Pennsylvania. 

(3)  The  Pennsylvania  Mercantile  and  License  Taxes.     This 
tax  is  paid  by  retail  and  wholesale  merchants  and  is  based  on 
their   gross   sales.      The   Pennsylvania  tax   committee   of    1911 
found  that  this  tax  was  unequal,  in  that  it  was  the  same  for  the 
merchant  who  made  a  large  profit  as  for  the  one  who  made  a 
small  one.     The  committee  thought  that  "  full  realization  of  an 
ideal  system  had  been  attempted  in  the  Winconsin  income  tax 
law,"  but  found  that  without  constitutional  authoiity  no  such 
progressive  tax  could  be  laid  in  Pennsylvania. 

The  criticism  of  the  Pennsylvania  committee  is  obviously 
sound.  A  tax  on  gross  sales  is  not  a  fair  tax,  because  gross  sales 
have  no  controlling  relationship  with  actual  or  net  profits  and 
are  therefore  not  a  reliable  index  of  ability  to  pay. 

(4)  The  Corporate  Excess  Tax.    Massachusetts  claims  to  have 
originated  this  form  of  corporate  taxation.     Business  corporations 
make  an  annual  return  to  the  State  Treasurer,  from  which  he 
estimates  the  full  value  of  the  capital  stock,  in  the  estimating  of 
which  debts  may  be  deducted  unless  incurred  for  the  purpose  of 
avoiding  the  tax.     From  the  estimated  full  value  of  the  capital 
stock  are  deducted  the  assessed  value  of  real  estate  and  machinery 
locally  taxable  and  also  such  property  as  is  located  and  taxed  in 
other  states.     The  balance,  or  corporate  excess,  is  taxed  at  the 
average  rate  of  taxation  for  cities  and  towns  during  the  preceding 
three  years;  providing,  however,  that  the  corporate  excess  shall 
never  exceed  20  per  cent  of  the  value  of  the  real  estate,  machinery 
and  merchandise  and  taxable  securities ;  nor  is  the  tax  to  be  less 
than  one-tenth  of  1  per  cent  of  the  market  value  of  the  capital 
stock.     The  tax  has,  in  the  main,  received  the  approval  of  the 


154  STATE  OF  NEW  YORK 

various  Massachusetts  commissions  that  have  studied  its  work- 
ings.    It  is,  nevertheless,  fairly  open  to  the  following  criticism : 

(1)  It  favors  corporations  with  a  large  bonded  indeted- 
ness.      This    means    inequality.      One   Boston    corporation, 
which  as  a  firm  has  been  assessed  locally  for  $837,000,  paid 
as  a  corporation  no  tax,  either  to  Boston  or  to  the  State. 

(2)  The  market  value  of  stock  is  fluctuating  and  uncer- 
tain, and  it  cannot  be  applied  to  closely  held  corporations 
whose  shares  are  not  dealt  in  widely,  and  these  last  must  be 
taxed  on  the  basis  of  net  assets.     The  tax  thus  becomes  a 
tax  on  property  rather  than  on  capitalized  earnings,   and 
is  open  to  the  objection  of  taxing  property  without  consider- 
ing its  income-bearing  character.    Moreover,  it  is  based  on  a 
valuation  that   does  not  take  account  of  debts,   since  cor- 
porations enjoy  the  privilege  of  deducting  debts  and  by  this 
means  frequently  escape  taxation  entirely. 

(3)  Corporations  that  have  a  large  part  of  their  capital 
invested  in  real  estate  and  machinery,  pay  practically  no 
corporate  excess  tax,  and  do  not  pay  on  whatever  other  prop- 
erty they  may  own.     This  is  likewise  true  of  corporations 
the  value  of  whose  merchandise  exceeds  the  value  of  the 
corporate  excess;  whereas  corporations  whose  property  con- 
sists largely  in  intangibles  and  whose  earning  capacity  as 
compared  with   their  tangible   assets   is   relatively  greater, 
pay  a  large  tax  which  they  would  not  pay  at  all  were  they 
individuals.     These  corporations,  it  was  found,  were  rapidly 
adopting  foreign   charters,    and   the   1903    amendment   re- 
ducing the  maximum  of  the  corporate  excess  tax  to  120  per 
cent  of  the  value   of  the   property   was   adopted   for   this 
reason. 

(4)  The  tax  is  not  proportional  to  the  earning  capacity. 
"  It  would  seem  fair  to  conclude  that  the  taxation  of 

business  corporations  is  proportional  neither  to  property  nor 
to  income.  It  is  not  an  adequate  means  of  reaching  either 
tangible  or  intangible  property.  It  is  not  levied  with  re- 
spect to  taxpaying  ability  as  measured  by  capitalized  earn- 
ings. The  merits  of  the  system  lie  rather  in  its  superiority 
to  the  general  property  tax,  in  its  administrative  efficiency 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  155 

and  in  its  approximation  to  the  ideal  system  of  taxing  net 
earnings  directly  or  indirectly."  (The  Taxation  of  Corpora- 
tions in  Massachusetts,  by  Harry  G.  Friedman.) 

The  corporate  excess  tax  is  administered  in  Massachusetts  by 
a  central  board.  Where  it  is  administered  locally  it  is  by  no 
means  as  successful. 

(5)  The  Wisconsin  Income  Tax.  Returns  are  made  for  the 
calendar  year,  though  in  cases  where  this  rule  would  cause  hard- 
ship the  Commission  may  allow  the  business  year  to  be  substi- 
tuted. In  its  principal  results  and  conclusions  the  return  should 
conform  to  the  report  made  to  the  Federal  government. 

INCOME  INCLUDES 

1.  All  rent  of  real  estate. 

2.  All  dividends,  and  all  interest. 

3.  All  profits  derived  from  the  transaction  of  business  or  from 
the  sale  of  real  estate  or  other  capital  assets;  provided  that  of 
the  profits  derived  from  such  sales  only  such  proportion  shall  be 
taxable  as  the  time  between  January  1,  1911,  and  the  time  of 
sale  bears  to  the  entire  period  of  ownership. 

4.  All  royalties  derived  from  mines  or  the  possession  or  use 
of  franchises  or  legalized  privileges  of  any  kind. 

5.  All  other  gains,  profits  or  income  of  any  kind  derived  from 
any  source  whatever,  except  such  as  are  specifically  exempt. 

DEDUCTIONS  ALLOWED 

1.  Wages  and  salaries  paid  in  the  production  of  such  income. 
The  name,  address  and  amount  paid  to  each  employee  who  re- 
ceives over  $700  to  be  reported.     This  is  true  whether  corpora- 
tion is  liable  to  tax  or  not.     The  Commission  may  disallow  the 
deduction  if  the  amount  is  excessive  or  not  paid  in  the  production 
of  income,  or  if  the  corporation  has  failed  to  file  the  name,  etc. 

2.  Ordinary  and  necessary  expenses  paid  out  of  income  in  the 
maintenance  and  operation  of  its  business,  including  a  reasonable 
allowance  for  depreciation,  and  in  the  case  of  mines  and  quarries 
an  allowance  for  depletion  of  ores;  and  including  interest  paid 
on  its  bonded  or  other  indebtedness  to  an  amount  of  such  indebted- 
ness, not  exceeding  its  paid-up  capital  stock  outstanding  at  the 
close  of  the  year ;  provided  that  the  amount  of  such  capital  stock 


156  STATE  OF  NEW  YORK 

shall  in  no  case  exceed  the  clear  value  of  its  assets  over  and  above 
all  indebtedness  and  liabilities. 

Additions  or  improvements  are  not  "  ordinary  or  necessary  re- 
pairs/7 nor  are  renewals  or  replacements  which  are  covered  by 
depreciation. 

Depreciation  is  limited  to  deterioration  or  exhaustion  by  "  use, 
wear  and  tear,"  and  does  not  cover  fluctuations  in  market  value. 

Depreciation  of  merchant's  stock  is  not  allowed. 

3.  Losses  actually  sustained  within  the  year,  and  not  covered 
by  insurance  or  otherwise.    Loss  cannot  be  deducted  unless  profit 
from  transaction  could  have  been  taxed  as  income.     This  rule 
prohibits  the  deduction  of  losses  sustained  in  business  without 
the  State. 

4.  Taxes  wherever  paid,  if  upon  the  source  from  which  the 
income  is  derived. 

Taxes  paid  upon  idle  property  or  unimproved  real  estate  cannot 
be  deducted.  Income  taxes  paid  in  cash  may  be  deducted  as 
"  necessary  expenses."  Taxes  paid  by  corporations  cannot  be  al- 
lowed as  deductions  from  the  income  of  the  stockholder. 

Special  assessments  cannot  be  deducted. 

5.  Dividends  received  from  any  corporations,  joint-stock  com- 
panies or  associations,  partnerships,  etc.,  i.  e.,  that  proportion  of 
the  income  upon  which  the  tax  has  already  been  paid. 

6.  Dividends  received  from  state  banks,  national  banks,  mutual 
savings  banks  and  trust  companies,  none  of  which  pays  an  income 
tax. 

APPORTIONMENT  OF  INCOME 

"  In  determining  taxable  income,  rentals,  royalties  and 
gains  or  profit  from  the  operation  of  any  farm,  quarry,  or 
mine,  shall  follow  the  situs  of  property  from  which  derived, 
and  income  from  personal  service  and  from  land  contracts, 
mortgages,-  stocks,  bonds,  and  securities,  shall  follow  the  resi- 
dence of  the  recipient.  With  respect  to  other  income,  persons 
engaged  in  business  within  and  without  the  state  shall  be 
taxed  only  upon  such  income  as  is  derived  from  business 
transacted  and  property  located  within  the  state." 

Two  methods  are  provided  for  dealing  with  this  last  class  of 
income  —  a  separate  accounting  or  an  apportionment.  Mercan- 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  157 

tile  establishments  and  a  few  other  special  classes  make  a  special 
accounting.  All  others,  unless  exempted  by  the  Commission,  have 
their  income  apportioned  according  to  the  following  rule: 

"  In  determining  the  proportion  of  capital  stock  employed 
in  the  state,  the  same  shall  be  computed  by  taking  the  gross 
business  in  dollars  of  the  corporations  in  the  state  and  add- 
ing the  same  to  the  full  value  in  dollars  of  the  property 
of  the  corporations  located  in  the  state.  The  sum  so  obtained 
shall  be  the  numerator  of  a  fraction  of  which  the  denominator 
shall  consist  of  the  total  gross  business  in  dollars  of  the 
corporation  both  within  and  without  the  state,  added  to  the 
full  value  in  dollars  of  the  entire  property  of  the  corporation 
both  within  and  without  the  state.  The  fraction  so  obtained 
shall  represent  the  proportion  of  the  capital  stock  represented 
within  the  state." 

Gross  business  consists  of  at  least  two  elements:  the  business 
of  production  and  that  of  distribution  or  sale.  The  former  is 
measured  by  costs  of  production,  the  latter  by  gross  sales  minus 
costs  of  production. 

It  is  believed  that  the  word  "  property  "  as  used  in  the  appor- 
tionment fraction  means  property  from  which  apportionable  in- 
come is  derived,  i.  e.,  the  full  or  book  value  of  property  other 
than  or  excluding  farms,  mines,  quarries  and  property  yielding 
rents  and  royalties  (income  of  which  follows  the  situs  of  the 
property),  and  land  contracts,  mortgages,  stocks,  bonds  and  securi-- 
ties  (the  income  of  which  follows  the  residence  of  the  recipient). 

KATES. 

On  the  first  $1,000  of  taxable  income  or  any  part  thereof, 

2  per  cent. 

On  the  second  $1,000  of  taxable  income  or  any  part  thereof, 
2%  per  cent. 

On  the  third  $1,000  of  taxable  income  or  any  part  thereof, 

3  per  cent. 

On  the  fourth  $1,000  of  taxable  income  or  any  part  thereof, 
3%  per  cent. 

On  the  fifth  $1,000  of  taxable  income  or  any  part  thereof, 

4  per  cent. 


158  STATE  OF  NEW  YORK 

On  the  sixth  $1,000  of  taxable  income  or  any  part  thereof, 

5  per  cent. 

On  the  seventh  $1,000  of  taxable  income  or  any  part  thereof, 

6  per  cent. 

On  all  taxable  income  in  excess  of  $7,000,  6  per  cent. 

ADMINISTRATION 

The  State  is  divided  up  into  assessment  districts.  An  assessor 
of  income  for  each  assessment  district  is  appointed  by  the  Tax 
Commission. '  Every  corporation,  whether  liable  to  the  tax  or  not. 
must  make  a  sworn  return. 

In  case  a  false  or  fraudulent  return  is  made,  the  additional 
amount  is  taxed  at  double  the  normal  rate.  In  case  of  failure  to 
make  the  return,  the  Commission  may  estimate  the  income  and 
impose  the  double  rate  upon  the  income  so  fixed.  In  addition, 
a  penalty  of  not  less  than  $100  or  more  than  $5,000  can  be  im- 
posed at  the  discretion  of  the  court,  and  the  officer  of  the  com- 
pany making  the  false  return  is  also  fined  not  to  exceed  $500, 
or  imprisoned  for  more  than  a  year. 

The  State  Tax  Commission  appoints  three  resident  taxpayers 
of  each  county  to  serve  as  a  board  of  review,  which  is  particularly 
charged  with  the  duty  of  examining  and  deciding  upon  the  facts 
of  disputed  cases.  An  appeal  from  its  decision  can  be  taken  to 
the  State  Tax  Commission. 

APPORTIONMENT 

The  taxable  income  once  computed  shall  be  assessed,  and  taxes 
at  such  rate,  shall  be  paid,  in  the  several  towns,  cities  and  vil- 
lages in  proportion  to  the  respective  amounts  of  income  derived 
from  each,  counting  the  income  derived  without  the  State  as 
belonging  to  the  locality  of  residence.  The  proportion  may  be 
determined  according  to  gross  income,  investment  or,  preferably, 
by  an  exact  allocation  of  net  income.  Ten  per  cent  goes  to  the 
State,  20  per  cent  to  the  county  and  70  per  cent  to  the  town,  city  or 
village.  Personal  property  tax  may  be  offset  against  income  tax. 

REPORT  OF  COMMISSION,   1912 

The  total  income  tax  assessed  amounts  to  $3,501,161,  of  which 
$2,392,454,  or  68.3  per  cent  is  assessed  against  corporations  and 


JOINT   LEGISLATIVE  COMMITTEE  ON  TAXATION  159 

$1,108,707,  or  31.7  per  cent  against  firms  and  individuals.  The 
average  rate  upon  firms  and  individuals  is  1.96  per  cent  and 
upon  corporations  5.4  per  cent.  The  total  taxable  income 
amounted  to  $100,845,862.  The  taxable  income  of  corporations 
amounted  to  $44,311,315,  and  of  individuals  $56,534,547. 

"  These  figures  are  noteworthy  in  many  respects.  It  has 
repeatedly  been  charged  by  critics  that  although  a  number  of 
American  states  have  experimented  with  the  income  tax,  in  no 
case  has  it  proved  a  success.  The  answer  has  been  that  the 
income  tax  has  never  been  given  a  fair  trial  by  any  American 
state.  This  answer  now  proves  to  be  essentially  correct." 

The  reduction  by  reason  of  the  personal  tax  offset  was  not 
known  at  the  time  the  report  was  written  and  was  merely  esti- 
mated. In  twelve  selected  counties,  excluding  the  corporations 
whose  income  tax  is  entirely  offset  by  the  personal  property  tax, 
we  have  1,055  corporations  with  an  assessed  income  of  $7,520,776, 
paying  a  tax  of  $411,611.  They  formerly  paid  a  personal  prop- 
erty tax  of  $71,473.  Increase,  $340,138. 

The  cost  of  administration  in  the  first  and  most  expensive 
year  will  be  only  $45,000  over  and  above  the  former  cost  of  the 
supervisors  of  assessment.  Total  cost  $100,000,  probably  the 
cheapest  tax  of  a  general  kind  collected  in  the  United  States. 

The  Wisconsin  tax  has,  on  the  whole,  encountered  very  little 
difficulty  with  the  large  interstate  corporations. 

"  The  large  interstate  corporations  usually  keep  their 
books  in  such  a  way  as  to  make  it  possible  to  apportion  or 
allocate  fairly  to  the  State  of  Wisconsin  its  share  of  earn- 
ings. Their  stock  is  frequently  listed  on  the  exchange  and 
their  financial  operations  are  publicly  reported.  Moreover, 
these  corporations  are  above  petty  deception.  These  cor- 
porations have  dealt  quite  as  fairly  with  the  Wisconsin 
income  tax  as  any  other  class  of  taxpayers.  It  is  just  as 
easy  to  assess  the  big  interstate  corporations  under  the  in- 
come tax  as  it  is  under  the  property  tax  —  a  fact  that  will 
be  appreciated  if  one  stops  to  think  how  '  property '  gets  its 
value,  and  the  degree  to  which  our  state  laws  insist  that 


160  STATE  OF  NEW  YORK 

'  franchise/  '  corporate  excess '  and  all  '  intangible  proper- 
ties '  of  corporations  shall  be  assessed  and  taxed  under  prop- 
erty taxes.  Yet  nobody  proposes  to  do  away  with  the  state 
taxation  of  the  property  of  the  interstate  corporations." 

EEPORT  OF  COMMISSION,  1914 

In  1914  the  income  assessed  rose  to  $126,979,330,  and  the 
tax  to  $4,140,571.  The  actual  cash  collected  amounted  to 
$1,935,846,  which  represents  the  excess  over  the  personal  property 
tax  collected.  It  must  be  noted  first  that  collections  have  been 
slow  owing  to  litigation,  and,  second,  that  the  income  tax  assess- 
ment machinery  has  resulted  in  an  extraordinary  increase  in  the 
personal  property  assessment.  The  tax  is  largely  one  on  success- 
ful business  concerns.  Corporations  paid  65.6  per  cent  and  in 
divi duals  34.4  per  cent.  The  rate  for  corporations  was  5.21  per 
cent,  for  individuals  1.9  per  cent.  Eighty-five  per  cent  of  the 
corporation  tax  is  assessed  on  manufacturing  and  mercantile  cor- 
porations, and  the  former  are  by  far  the  largest  contributors. 

"  There  is  no  reason  why  manufacturing  concerns  should 
not  contribute  to  the  state  when  they  are  prosperous  and 
have  reached  the  dividend-paying  stage.  There  is  every 
reason  why  they  should  contribute.  On  the  o.ther  hand,  the 
new  and  struggling  enterprise,  the  expirimental  industry, 
the  weak  and  small  producers,  need  and  deserve  protection; 
and  it  would  be  well,  in  the  opinion  of  the  Commission,  if 
such  concerns  could  be  exempted  from  the  personal  property 
tax  and  not  be  called  upon  to  contribute  to  the  state  until 
their  taxpaying  ability  had  been  definitely  proven." 

The  income  tax  law  exempted  from  the  personal  property  tax 
Moneys,  credits,  household  goods,  farm  machinery,  and  other 
minor  personal  property,  but  much  personal  property,  including 
merchants'  and  manufacturers'  stock,  still  pay  the  personal  prop- 
erty tax.  These  last  "  baffle  the  efforts  of  the  best  assessors  "  and 
the  Commission  recommends  that  they  be  included  in  the  exemp- 
tion list. 


PART  XII 
SUBSTITUTES  FOR  THE  PERSONAL  PROPERTY  TAX 

We  now  come  to  the  three  plans  most  seriously  urged  by  wit- 
nesses before  the  Committee  as  best  possible  substitutes  for  the 
personal  property  tax: 

(1)  The  Ability,  or  Presumptive  Income,  Tax. 

(2)  The  Classified  Personal  Property  Tax. 

(3)  The  Income  Tax. 

CHAPTER  I 

THE  ABILITY,  OR  PRESUMPTIVE  INCOME,  TAX. 
"  The  ability  tax,  so-called,  is  a  tax  on  the  abilities  of 
those  who  profit  from  the  opportunities  afforded  by  the 
State  of  New  York.  Conceding  that  the  fairest  test  of 
ability  to  pay  is  income,  and  assuming  that  a  direct  income 
tax  is-  unattainable,  the  proposition  is  to  get  at  the  income 
indirectly  and  by  outward  signs  utilizing  certain  definite 
facts  of  expenditure  as  affording  some  indication  of  rela- 
tive income.  The  ability  tax,  as  a  presumptive  income  tax, 
would  therefore  be  composed  of  three  parts: 

A.  A  habitation  tax; 

B.  An  occupation  tax; 

C.  A  salaries  tax; 

which  provisions  by  which  only  one  of  these  taxes  would  be 
payable  by  any  particular  person. 

A.  THE  HABITATION  TAX 

'"  The  habitation  tax  is  to  be  levied  upon  individuals 
occupying  houses  or  apartments  for  residential  purposes.  It 
proceeds  upon  the  theory  that  what  a  man  spends  for  rent 
is  a  rough  indication  of  his  ability  to  contribute  to  the 
public  burden.  Inasmuch  as  the  ratio  of  house  rent  to  in- 
come decreases  as  the  amount  of  rent  increases,  it  is  ob- 
vious that,  in  order  to  secure  approximate  justice',  the  tax 
must  be  rather  sharply  graduated.  The  tax  is  accordingly 
based  upon  a  progressively  graduated  scale.  The  tax  is  so 


162  STATE  OF  NEW  YOKK 

calculated  that  the  taxpayer  will  pay  a  sum  that  is  about; 
equivalent  to  1  per  cent  of  his  income,  as  indicated  by  hia 
house  rent.  As  a  rental  increases  it  is  multiplied  by  a  con- 
tinually increasing  figure  in  order  to  reach  the  presumptive 
income,  and  only  the  excess  of  this  over  $2,000  is  considered 
the  taxable  income.  Moreover,  in  order  to  prevent  miscar- 
riages of  justice,  it  is  provided  that  if  any  one  finds  that 
the  tax  amounts  to  more  than  1  per  cent  of  his  actual  in- 
come, he  shall  have  the  right  to  declare  and  prove  his  actual 
income  and  to  have  his  tax  reduced  to  1  per  cent  of  his  in- 
come. Where  a  man  lives  in  his  own  house  the  rental  value 
shall  be  calculated  at  7-  per  cent  of  the  assessed  value  of  the 
property.  Provision  is  also  made  for  people  who  live  in 
hotels  or  apartments  and  the  tax  is  applicable  to  those  who 
have  occupied  the  apartments  continuously  for  at  least  three 
or  four  months. 

"  Several  criticisms  might  be  urged  against  this  scheme. 
It  might  be  alleged  that  the  tax  is  a  tax  on  the  poor  man. 
In  reality  the  opposite  is  the  case.  All  rentals  below  $50  a 
month,  that  is  $600  a  year,  are  exempt.  This  corresponds  to 
a  total  expenditure  of  from  $2,500  to  $3,000.  Every  one, 
therefore,  with  a  presumptive  income  under  this  amount, 
pays  no  tax  at  all.  Moreover,  the  amount  of  the  tax  on 
slightly  higher  rentals  is  exceedingly  moderate,  while  on 
very  high  rentals  the  tax  is  much  greater  in  proportion. 
This  will  be  seen  from  the  following  scale: 

"  On  rentals  from  the  tax  is 

$600   to      $700 $5  00 

1,000  to     1,100 30  00 

2,000  to     2,100 87  00 

4,000  to     4,100 226  00 

6,000  to     6,200 426  00 

10,000  to  10,200 796  00 

25,000  to  26,000 4,400  00 

In  other  words,  the  occupier  of  a  house  of  $6,000  rental 
pays  about  eighty  times  as  much  tax  as  the  occupier  of  a 
house  of  $600  rental,  although  his  rent  is  only  ten  times  as 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  163 

great.  If  we  compare  the  occupiers  of  houses  of  $1,000  and 
$25,000  rental,  respectively,  we  find  that  the  latter  pays 
about  146  times  as  much  tax  as  the  former,  although  he  pays 
only  twenty-five  times  as  much  rent. 

"  The  habitation  tax  thus  entirely  exempts  all  those  with 
incomes  under  about  $3,000  and  imposes  an  insignificant 
burden  upon  those  between  $3,000  and  $6,000,  while  it  con- 
siderably increases  as  the  income  augments.  The  habitation 
tax  is  not  a  tax  upon  the  poor  man,  and  not  an  appreciable 
burden  upon  those  in  moderate  circumstances,  while  even 
for  the  rich  man  the  tax  cannot  exceed  1  per  cent  of  the 
actual  income. 

"  In  the  second  place,  it  might  be  alleged  that  the  habita- 
tion tax  falls  upon  the  real  estate  owner,  for  the  reason  that 
a  prospective  tenant  of,  let  us  say,  a  $650  apartment  would 
insist  upon  having  his  rent  reduced  to  $600  in  order  to 
escape  the  tax.  This  argument,  however,  is,  to  a  large  ex- 
tent, fallacious.  In  the  first  place,  the  $650  tenant  will 
never  secure  the  owner's  consent  to  a  reduction  of  $50  in 
rent  in  order  to  enable  the  tenant  to  save  $5  in  tax.  The 
same  would  be  true  of  somewhat  higher  rentals,  because,  ac- 
cording to  the  scale  proposed,  a  reduction  of  every  $100  in 
rent  would  involve  a  saving  of  only  $5  in  tax.  So  that 
even  at  the  very  worst,  it  would  only  be  at  the  margin  of 
each  class  of  tenants  that  there  would  be  any  pressure  at  all 
to  demand  any  reduction  of  rentals.  But  even  this  would 
not  be  true.  The  only  way  in  which  a  landlord  could  be 
induced  to  grant  a  reduction  of  rent  would  be  through  the 
fear  of  having  his  apartments  vacated.  But  if  the  tenants 
of  a  particular  grade  of  apartments  would  actually  be  in- 
duced to  move  to  a  lower-priced  apartment  because  of  the 
tax,  the  places  vacated  by  them  would  be  instantly  filled  by 
the  influx  of  the  tenants  from  the  next  higher  grade  of 
apartments,  who  would,  in  like  manner,  be  induced  to  seek 
lower-priced  apartments.  Therefore,  what  might  possibly 
be  lost  in  one  way  would  be  gained  in  the  other;  and  the 
only  apartments  which  might  suffer  a  possible  reduction  of 
rentals  because  of  a  threatened  disappearance  of  their  ten- 
ants would  be  the  highest-priced  apartments  in  the  city. 


164  STATE  OF  NEW  YORK 

But  as  these  highest-priced  apartments  are  occupied  by  the 
wealthiest  classes,  the  amount  of  tax  to  which  they  would 
be  subject  would  be  such  an  insignificant  proportion  of  their 
entire  income  as  in  all  probability  to  lead  to  no  such  transfer 
at  all. 

"  Thus  it  will  be  seen  that  the  argument  that  the  habita- 
tion tax  falls  on  the  real  estate  owner,  is  fallacious.  If  it  is 
shifted  at  all  to  the  real  estate  owner,  only  an  exceedingly 
small  part  will  fall  on  him  and  the  rest  will  still  be  paid  by 
the  tenant. 

"  The  habitation  tax  is  therefore  not  a  tax  on  the  small 
man  nor  is  it  a  tax  on  the  real  estate  owner.  It  is  a  tax  on 
the  presumptive  income  of  everybody  who  resides  in  New 
York  City.  Its  chief  value  as  compared  with  our  present 
system  of  taxation  is  that  it  reaches  the  man  who  is  not  in 
business  as  well  as  the  rich  man  who,  although  living  here, 
now  escapes  taxation  by  claiming  residence  outside  of  New 
York. 

"  The  habitation  tax  will,  however,  affect  those  who  earn 
their  living  in  New  York  but  who  do  not  live  here.  They, 
too,  possess  an  ability  which  ought  to  be  reached.  These  it  is 
proposed  to  reach  by: 

B.    THE  OCCUPATION  TAX 

"  The  occupation  tax  is  a  flat  tax  on  the  premises  occupied 
for  business  or  for  securing  a  livelihood.  It  is  levied  on  the 
basis  of  the  annual  rental  value  of  the  premises.  The  tax 
is  7  per  cent  of  the  annual  rental  value,  with  a  reduction  of 
$25  in  every  case.  Where  a  man  occupies  his  own  building 
for  business  purposes  or  for  -purposes  of  a  livelihood,  the 
rental  value  is  estimated,  as  in  the  case  of  the  habitation 
tax,  at  7  per  cent  of  the  assessed  valuation.  The  occupation 
tax  is  not  a  tax  upon  the  small  business  man.  Business 
premises  are  liable  to  the  tax  only  when  the  rent  exceeds 
$600  and  as  the  tax  is-  levied  at  the  rate  of  7  per  cent  only  on 
the  rental  exceeding  that  sum,  the  amount  of  the  tax  is  in- 
significant. On  even  the  more  moderately  successful  busi- 
ness man,  whose  business  rentals  are  $1,000  a  year,  for  in- 
stance, the  tax  is  only  $50. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  165 

"  The  occupation  tax,  although  concededly  not  ideal,  is 
far  better  than  a  tax  on  the  stock-in-trade  and  assets  of  the 
business  man.  Any  attempt  to  enforce  the  present  personal 
property  tax  or  even  to  levy  a  new  low-rate  tax  upon  his 
stock  in  trade  and  assets  would  be  both  more  onerous  and 
less  equitable  than  the  occupation  tax.  No  one,  more- 
over, will  be  held  to  both  the  habitation  tax  and  the  occu- 
pation tax.  The  habitation  tax  will  hit  large  classes  who  do 
not  pay  the  occupation  tax;  the  occupation  tax  will  hit 
large  classes  who  do  not  pay  the  habitation.  In  both  cases, 
any  tax  paid  on  personal  property  may  be  deducted. 

"  In  the  case  of  the  occupation  tax  also,  the  objection 
might  be  raised  that  the  burden  will  be  shifted  to  the  owner 
of  the  real  estate.  As  has  been  pointed  out  above  in  the 
case  of  the  habitation  tax,  this  argument  is  fallacious.  Even, 
however,  if  it  were  true  in  part,  and  if  a  portion  of  the  tax 
were  to  remain  on  the  real  estate  owner,  it  must  be  remem- 
bered that  the  whole  project  is  to  be  regarded  as  an  alterna- 
tive to  the  general  property  tax,  the  chief  burden  of  which 
notoriously  falls  on  real  estate.  The  choice  lies  between 
an  increased  rate  of  the  general  property  tax  (in  actual 
fact  an  increased  rate  on  real  estate)  on  the  one  hand,  and 
the  ability  or  indirect  income  tax  on  the  other.  Even  if,  as 
is  most  unlikely,  a  small  part  of  the  occupation  tax  should 
be  shifted  to  the  real  estate  owner,  it  nevertheless  would 
prove  as  to  the  unshifted  part  a  corresponding  relief  to  real 
estate.  As  a  matter  of  fact,  the  tax  will  be  borne,  not  by 
real  estate,  but  by  the  business  and  professional  classes. 

C.  SALARIES  TAX 

"  The  third  part  of  the  project  is  a  tax  on  all  salaries 
paid  or  received  in  the  State  of  New  York  except  salaries 
paid  by  the  Federal  government.  The  exemption  is  in  all 
cases  $2,000  and  the  tax  is  graded  from  1  per  cent  up  to 
5  per  cent,  the  last  rate  being  levied  on  the  excess  of  salaries 
over  $30,000.  Provision  is  made  for  the  reporting  of  sal- 
aries by  employers,  and  for  withholding  by  them  of  the  tax 
at  the  source. 


166  STATE  OF  NEW  YORK 

"  The  salaries  tax  is  not  a  tax  on  the  small  man.  Since 
all  salaries  under  $2,000  are  exempt,  the  recipient  of  a 
$5,000  salary  would  pay  only  $30  a  year.  On  the  higher 
salaries  like  those  of  the  more  successful  professional  men 
and  of  well-paid  corporation  officials  the  tax  is  graded  ac- 
cording to  a  progressive  scale.  The  salaries  tax  is,  there- 
fore, in  reality  a  tax  on  large  incomes  derived  from  per- 
sonal exertion.  It  is  a  tax  upon  the  wealthier  class,  not 
upon  the  poor  man. 

"  Moreover,  it  would  be  equally  false  to  state  that  sal- 
aries are  taxed  while  other  incomes  are  not  taxed.  Just  the 
reverse  is  true.  Business  incomes  are  reached  by  the  occu- 
pation tax;  other  incomes  in  general  by  the  habitation  tax. 
~No  one  is  to  pay  more  than  one  of  these  taxes.  The  object 
of  the  salaries  tax  is  not  to  single  out  for  taxation  people 
with  salaries;  but  on  the  contrary,  to  prevent  people  with 
large  salaries,  but  living  outside  of  the  State  and  who  carry 
on  no  other  business  in  the  State  —  from  escaping  justice. 

"  The  salaries  tax,  instead  of  being  an  unequal  tax  on  a 
special  class,  is  an  attempt  to  secure  equality  of  taxation  by 
reaching  those  who  would  otherwise  escape. 

t(  In  considering  the  ability  or  presumptive  income  tax, 
it  must  be  compared  not  to  any  ideal  scheme,  but  with  the 
present  methods.  The  general  property  tax  is  concededly 
an  absurdity.  The  low  rate  tax  on  intangibles  would  do 
more  harm  than  good.  In  New  York  there  remains  only  a 
direct  income  tax  or  a  presumptive-income  tax.  The  pre- 
sumptive income  tax  is  the  ability  tax. 

"  It  is,  indeed,  quite  true  that  neither  the  habitation  tax 
nor  the  occupation  tax  is  in  exact  mathematical  proportion 
to  the  taxpayers'  income.  We  must  remember  that  a  fairly 
rough  approximation  of  justice  which  is  administratively 
simple,  and  workable,  may  be  better  than  some  ideal  scheme 
which  does  not  work  out  in  practice.  The  ability  tax  would 
be  exceedingly  easy  to  administer  by  either  state  or  local 
officials,  and  the  revenue  would  be  very  large.  In  the  City 
of  New  York  alone,  at  rates  suggested,  the  revenue  would 
be  from  twenty  to  twenty-five  million  dollars  a  year.  In  the 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  167 

other  cities  of  the  State  the  revenue  would  be  proportionate. 
Under  our  present  system  vast  classes  of  the  population 
escape  and  a  small  proportion  bears  the  burden.  Under  the 
new  scheme  many  classes  will  be  reached  who  now  are  not 
reached.  While  ideal  justice  will  not  be  attained,  a  great 
step  forward  will  have  been  taken.  As  in  every  question  of 
taxation  reform,  we  must  consider  the  proposition  not  from 
the  point  of  view  of  ideal  justice,  but  from  that  of  substan- 
tial progress." 

The  above  was  prepared  and  submitted  to  us  by  Professor 
Seligman,  Chairman  of  the  Executive  Committee  of  the  Now 
York  City  Special  Committee  on  Taxation.  His  Committee  last 
year  recommended  such  a  tax  for  the  City  of  New  York,  but  has 
since  declared  its  preference  for  the  State  income  tax. 

The  business  tax  part  of  this  plan  has  been  in  force  in  some 
of  the  Canadian  cities  for  a  number  of  years,  notably  in  Winni- 
peg and  Montreal,  where  in  lieu  of  a  personal  property  tax  a 
business  tax  is  levied,  based  upon  the  annual  rental  of  the  prem- 
ises occupied,  in  Winnipeg  at  the  rate  of  6%  per  cent,  and  in 
Montreal  at  7%  per  cent.  Judging  by  the  reports  of  the  Can- 
adian commissioners,  the  tax  is  a  most  successful  one  and  gives 
general  satisfaction. 

The  system  of  business  taxes  in  the  City  of  Toronto  and  other 
Ontario  cities  is  somewhat  different,  the  amount  of  levy  depend- 
ing not  only  upon  the  value  of  the  real  estate  occupied,  but  also 
upon  an  arbitrary  classification  applied  to  the  different  lines  of 
business,  running  from  25  per  cent  on  some  lines  of  business  to 
150  per  cent  on  others.  This  system  appears  to  offer  many  more 
difficulties  and  complications  than  the  simpler  one  prevailing  in 
Winnipeg  and  Montreal. 

France  and  other  European  countries  have  used  the  habita- 
tion tax  and  the  business  tax  in  different  forms.  In  fact  it  is  still 
an  integral  part  of  the  French  system.  However,  the  whole 
tendency  in  Europe  has  been  to  rely  more  and  more  on  a  direct 
income  tax. 

The  Ability  Tax  has  many  advantages.  We  do  not  feel,  how- 
ever, that  we  can  recommend  its  adoption  as  a  State-wide  sub- 
stitute for  the  personal  property  tax.  It  is  primarily  an  urban 


168  STATE  OF  NEW  YORK 

tax.  While  rental  value  may  in  a  large  city  be  on  the  whole  a 
fairly  accurate  measure  of  the  taxpaying  ability  of  large  classes 
of  taxpayers,  the  test  would  by  no  means  hold  good  in  the  rural 
districts.  Thus  it  is  well  known  that  in  the  smaller  towns  and 
villages,  the  habitation  occupied  is  not  an  accurate  test  of  the 
wealth  of  the  occupant. 

Moreover,  the  plan  is  frankly  one  to  reach  income  by  indirect 
means.  Professor  Seligman,  in  describing  the  tax,  says :  "  Con- 
ceding that  the  fairest  test  of  ability  to  pay  is  income,  and 
assuming  that  a  direct  income  tax  is  unattainable  the  proposition 
is  to  get  at  the  income  indirectly,  and  by  outward  signs  utilizing 
certain  definite  facts  of  expenditure  as  affording  some  indica- 
tion of  relative  income."  Now,  it  is  quite  proper  to  assume  in 
the  case  of  a  single  city  that  an  income  tax  is  unattainable  be- 
cause for  rather  obvious  reasons  a  single  city  could  not  hope 
successfully  to  administer  such  a  tax.  But  this  is  not  true  of 
the  State;  and  if  one  of  the  main  arguments  for  the  ability  or 
indirect  income  tax  is  based  on  the  unattainability  of  the  direct 
income  tax,  this  reason  disappears  when  the  latter  is  attainable. 

In  the  second  place,  if  income  be  the  fairest  test  of  ability  to 
pay,  why  resort  to  outward  signs,  to  approximations,  to  the  in- 
direct means  of  ascertaining  the  income  when  it  is  possible  to 
do  so  by  the  direct  method  ?  As  between  the  indirect  income  tax 
and  the  personal  property  tax  there  is  much  to  be  said  for  the 
former,  but  as  between  an  indirect  income  tax  and  a  direct  one, 
the  advantages  are  clearly  with  the  latter. 

CHAPTER  II 
THE  CLASSIFIED  PROPERTY  TAX 

This  tax  is  based  upon  the  theory  that  real  estate,  tangible 
personalty  and  intangible  personalty,  respectively,  rest  upon  dif- 
ferent economic  bases,  and  that  it  is  unjust  to  tax  all 
three  classes  at  the  same  rate.  Furthermore,  that  whenever  a 
tax  upon  personalty  exceeds  an  amount  equivalent  to  a  7  or  8 
per  cent  income  tax,  the  average  taxpayer  will  not  pay  it,  if  he 
can  evade  it. 

Professor  Bullock  in  describing  this  system  gives  the  following 
threefold  classification : 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  169 

(1)  Real  estate  at  the  general  property  tax  rate.    The  heaviest 
burden  will  fall  here,  but  this  is  greatly  alleviated  by  the  fact 
that  whenever  real  property  changes  hands,   existing  taxes  are 
capitalized,  so  that  the  purchaser  buys  upon  what  is  practically 
a  tax-exempt  basis. 

(2)  Intangible  personalty  —  a  rate  of  three  to  four  mills  is  a 
safe  limit  for  intangibles.    The  experience  of  Pennsylvania,  Mary- 
land and  Minnesota  would  seem  to  bear  this  out.     This  rate  is 
equivalent  to  a  6  per  cent  income  tax  on  a  security  paying  5 
per  cent  interest. 

(3)  Tangible  personalty.     The  rate  on  tangible  personalty  can 
be  about  double  that  on  intangible  personalty,  for  the  reason  that 
capital  employed  in  trade  is  presumed  on  an  average  to  yield  the 
ordinary  trade  profit,  which  is  about  twice  the  rate  of  simple 
interest.     Therefore  six  or  eight  mills  seem  to  be  a  fair  rate  for 
tangible  property.     This  would  be  equivalent  to  an  income  tax 
of  6  per  cent  upon  intangible  personalty  yielding  an  income  at 
about  10  per  cent. 

ARGUMENT  FOR  CLASSIFICATION  OF  PROPERTY  FOR  PURPOSES  OF 

TAXATION 

"All  successful  legislation  is  based  upon  a  reasonable  discrim- 
ination between  the  classes  of  things  with  which  it  deals,  and 
laws  that  ignore  necessary  distinctions  between  classes  prove  in- 
effectual or  pernicious  in  their  results. 

"  Uniform  regulations  for  the  transfer  of  all  classes  of  prop- 
erty, a  uniform  penalty  for  all  crimes,  and  absolute  uniformity 
in  the  treatment  of  persons,  without  discrimination  of  age,  sex, 
or  condition,  would  be  no  more  unreasonable  than  a  uniform  rate 
of  taxation  for  all  property,  irrespective  of  its  nature  or  class. 

"  Diversification  of  rates  of  taxation  agrees  with  the  ordinary 
business  principle  of  adjusting  charges  and  prices  to  '  what  the 
traffic  will  bear.'  No  railroad  charges  as  much  for  carrying  logs 
as  for  carrying  furniture;  but  the  discrimination  in  favor  of 
logs,  by  enabling  that  traffic  to  move,  contributes  to  the  revenue 
of  the  road  and  decreases  the  charges  upon  furniture  and  other 
traffic  of  higher  grade. 

"  When  the  average  rate  of  taxation  was  fifty  cents  per  $100, 
it  was  possible  to  tax  all  property  at  a  uniform  rate  because  the 


170  STATE  OF  NEW  YORK 

tax  was  not  higher  than  any  important  class  of  property  could 
bear;   but  under  modern  conditions  the  rate  of  taxation  is 
high  that  it  is  necessary  to  classify  property  and  adjust  methot 
and  rates  of  taxation  to  the  needs  of  each  important  class. 

"  Reasonable  discrimination  between  the  objects  of  taxation  is 
the  principle  upon  which  our  customs  tariff  and  internal  taxes 
upon  commodities  are  now  adjusted.  We  tax  beer  at  one  rate, 
spirits  at  another,  and  tobacco  at  another,  and  no  sensible  man 
would  propose  to  tax  all  three  commodities  at  a  uniform  rate. 
Our  tariff  taxes  cut  diamonds  at  the  rate  of  10  per  cent  and 
levies  upon  sugar  a  duty  equivalent  to  60  per  cent  ad  valorem. 
This  discrimination  is  both  just  and  expedient,  since  a  duty  of 
60  per  cent  upon  diamonds  would  lead  to  so  much  smuggling  as 
to  produce  little  revenue;  while  the  duty  of  10  per  cent  yielded, 
in  1905,  $2,500,000. 

"  This  illustration  not  only  makes  clear  the  necessity  of  ad- 
justing taxation  to  '  what  the  traffic  will  bear/  but  points  to  the 
reason  therefor.  The  duty  of  10  per  cent  can  be  collected  from 
any  dealer  in  diamonds,  because  the  government  succeeds  in  col- 
lecting it  from  practically  all  dealers.  If  the  duty  were  raised 
to  60  per  cent,  and  a  few  dishonest  dealers  were  tempted  to  evade 
payment  of  it,  the  honest  dealers,  who  would  have  no  objection 
to  paying  duties  uniformly  collected  upon  all  persons  engaged  in 
their  trade  would  have  no  choice  but  to  resort  to  smuggling  or  go 
out  of  business.  Evasion  of  taxation,  when  it  becomes  general, 
is  not  due  to  dishonesty  on  the  part  of  the  average  taxpayer, 
but  to  the  sheer  inability  of  the  honest  man  to  pay  his  taxes  when 
other  persons  succeed  in  evading  theirs."  (C.  J.  Bullock.) 

CHAPTER  III 
THE  LOW  RATE  ON  INTANGIBLES 

This  plan  represents,  in  part,  the  scheme  for  a  classified  prop- 
erty tax  as  proposed  by  Professor  Bullock,  except  that  the  advo- 
cates of  this  single  scheme  do  not  include  Bullock's  suggestion 
in  regard  to  a  low  rate  for  tangible  personalty,  but  deal  solely 
with  intangibles.  The  theory  upon  which  this  tax  rests  is : 

(1)  That  the  general  property  tax  has  been  a  failure  as  ap- 
plied to  intangibles,  because  the  rate  in  most  states  amounts  to 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  171 

a  sum  which  represents  from  40  to  50  per  cent  of  the  entire  in- 
come from  an  average  high-grade  investment. 

(2)  That  taxpayers  refuse  to  pay  a  confiscatory  rate,  but  that 
they  would  voluntarily  pay  a  rate  consistent  with  the  low  rate  of 
income  derived  from  such  property. 

CLASSIFICATION  OF  SYSTEMS  OF  LOW  RATE  UPON  INTANGIBLES 

( 1 )  The  registration  plan  —  a  simple  payment  f OT  a  term  of 
years  upon  the  face  value  of  the  debt,  without  any  attempt  to 
reach  the  real  value. 

(a)  Exemption  from  other  taxation  for  a  period  of  years 
upon  the  payment  of  a  definite  amount,  but  not  for  the  life 
of   the   security.      Example :    Connecticut  —  exemption   for 
five  years.     Exempt  locally  in  the  hands  of  the  holder. 

(b)  Exemption  for  the  life  of  the  security.     Example: 
New  York  Secured  Debt  Law  before  amendment  of  1915. 

(2)  Annual  tax  based  upon  full  value  of  the  security. 

(a)  At  flat  rate  for  State  or  apportioned  for  local  pur- 
poses.   Examples :  Pennsylvania,  Minnesota  and  Iowa. 

(b)  Combined  local  rates   plus   State  rates.      Example: 
Maryland.     Local:  uniform  rate  of  3  mills.     State:  general 
property  rate,  averaging  about  1.8  mill.     Total  rate  about 
4.8  mills;  now,  1915,  4.5  mills. 

ARGUMENTS  FOR  THE  LOW  RATE  ON  INTANGIBLE  PROPERTY 
The  principal  arguments  for  the  tax  were  presented  by  one  of 
the  Massachusetts  committees  as  follows : 

(1)  That  it  will  impose  upon  the  classes  of  intangible 
personalty  subject  to  it  a  rate  of  taxation  proportionate  to 
the  incomes  which  they  yield; 

(2)  That  it  will  reduce  the  temptation  on  the  part  of 
owners  of  money  and  taxable  securities  to  conceal  such  prop- 
erty and  evade  the  payment  of  taxes; 

(3)  That  it  will  put  a  stop  to  the  concentration  of  in- 
tangible personalty  in  certain  towns; 

(4)  That  it  will  tend  to  make  residence  in  this  State  more 
attractive  for  wealthy  property-holders ; 

(5)  That  it  will  relieve  the  present  inequality  in  the  dis- 
tribution of  the  tax  burden  between  personalty  and  realty 


172  STATE  OF  NEW  YORK 

by  bringing  a  larger  amount  of  the  former  upon  the  as- 
sessors' lists; 

(6)   That  it  will  do  away  with  the  general  demoralization 
attendant  upon  the  working  of  the  present  system. 

CRITICISM  OF  THE  ABOVE  ARGUMENTS 

It  is  true  that  most  of  the  above  hold,  in  part  at  least,  for 
the  low  rate  on  intangibles.  However,  these  arguments  would  hold 
to  the  same  extent  if  applied  to  almost  any  other  scheme  that 
would  reduce  the  tax  rate  to  the  equivalent  of  a  6  to  8  per  cent 
income  tax. 

The  above  arguments  represent  not  simply  the  strength  of  the 
so-called  "  low  rate  on  intangibles,"  but  rather  the  strength  of 
the  general  and  broader  idea  that  the  tax  rate  should  be  adjusted 
to  all  classes  of  personalty  according  to  the  income-bearing 
capacity. 

PENNSYLVANIA  LOW  RATE  ON  INTANGIBLES 

The  Pennsylvania  system  has  two  parts: 

(A)  The  tax  on  intangible  personalty  other  than  corpo- 
rate loans; 

(B)  The  tax  upon  loans  of 

(1)  Counties  and  municipalities; 

(2)  Business  corporations  doing  business  in  Pennsyl- 

vania. 

(A)   TAX   ON   INTANGIBLES   OTHER   THAN   CORPORATE   LOANS, 

APPLIES  TO 

(1)  Money  at  interest; 

(2)  Money  owing  by  solvent  debtors; 

(3)  Mortgages; 

(4)  Public  securities  not  exempt  from  taxation  and  not 
included  under  the  corporate  loan  tax; 

(5)  -Shares  of  stock  in  all  corporations  other  than  cor- 
porations subject  to  taxation  upon  capital  stock  or  business 
in  Pennsylvania. 

Method  of  Assessment 

The  tax  upon  intangible  property  other  than  corporate  loans  is 
assessed  by  the  county  officials  upon  the  basis  of  returns  made 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  173 

by  the  taxpayers.  The  law  requires  every  person  to  make  a 
return  of  all  taxable  money,  credits  and  securities ;  and  these  state- 
ments must  be  made  under  oath.  Upon  the  refusal  or  failure  of 
any  person  to  make  the  required  returns,  the  assessors  are  au- 
thorized to  make  an  assessment  from  the  best  information  they 
can  obtain.  In  most  of  the  counties  of  the  State,  this  arbi- 
trary assessment  law  is  not  rigidly  enforced. 

* 
Yield  According  to  Classified  Sources 

(1)  Mortgages  —  a  very  large  part  of  the  tax,  possibly  50  per 
cent,  is  collected  from  mortgages  on  real  estate,  since  the  law 
makes  rigorous  provision  for  ascertaining  the  ownership  of  this 
class  of  property. 

(2)  Trust  companies — a  considerable  amount  is  paid  by  the 
trust  companies  upon  personal  property  which  they  hold  in  trust. 

(3)  The  remainder,  about  30  per  cent,  is  paid  by  individuals, 
assessed  by  a  sworn  return  or  arbitrary  estimate. 

Results  of  Pennsylvania  Experience  with  4:-Mill  Tax 

From  the  point  of  view  of  amount  of  intangible  personal  prop- 
erty listed,  the  Pennsylvania  system  undeniably  has  been  suc- 
cessful. The  following  statistics,  expressed  in  round  numbers, 
indicate  the  striking  growth  in  the  amount  of  intangibles  listed 
from  1885  to  1915: 

1885 $14-5,300,000 

1888 429,000,000 

1891 575,000,000 

1894 613,000,000 

1897 , 073,000,000 

1900 722,000,000 

1903 847,100,000 

1906 932,000,000 

1907 1,014,000,000 

1909 1,141,000,000 

1910 1,184,000,000 

1912 1,266,000,000 

1913 ,  1,402,000,000 


174  STATE  OF  NEW  YORK 

It  must  not  be  inferred,  however,  that  the  local  assessors  dis- 
cover all  intangible  property  subject  to  taxation  and  list  it 
at  its  true  value.  As  a  matter  of  fact,  the  administration  of 
the  Pennsylvania  law  is  far  from  rigorous,  and  except  in  the 
case  of  mortgages  and  personal  property  held  in  trust  by  trust 
companies,  there  is  more  or  less  evasion.  As  brought  out  later  on, 
the  field  in  which  Pennsylvania  has  been  most  successful  has 
been  that  in  which  the  State  has  not  relied  upon  the  self-assess- 
ment of  the  individual  taxpayer. 

(B)  TAX  UPON"  CORPORATE  LOANS 

This  tax  is  deducted  by  the  treasurers  of  the  counties,  mu- 
nicipalities and  business  corporations  when  paying  interest  upon 
loans  and  is  paid  directly  into  the  State  treasury. 

It  was  the  original  intention  of  this  law  to  levy  the  corporate 
loan  tax  upon  the  bonds  of  all  domestic  corporations,  as  well  as 
upon  other  bonds  held  in  the  State.  The  Supreme  Court  of  the 
United  States,  however,  decided 

(1)  That  a  corporation  cannot  be  required  to  deduct  a 
tax  from  interest  paid  to  nonresident  bondholders; 

(2)  That  a  foreign  corporation  doing  business  in  the  State 
cannot  be  required  to  deduct  a  tax  from  interest  disbursed 
in  another  State. 

The  result  of  these  decisions  has  been  to  limit  the  tax  to 
Pennsylvania  corporations  and  to  only  those  bonds  of  Pennsyl- 
vania corporations  owned  by  residents  of  Pennsylvania. 

Although  limited  in  its  operation  to  bonds  owned  by  residents 
of  Pennsylvania,  the  yield  of  the  corporate  loan  tax  has  steadily 
increased  at  a  satisfactory  rate.  From  1886  to  1890  the  receipts 
average  $300,000  per  year,  this  amount  being  somewhat  less 
than  the  usual,  because  considerable  sums  were  withheld  by  cor- 
porations pending  the  outcome  of  litigation. 

From  1891  to  1895  the  receipts  averaged  $1,130,000. 

From  1896  to  1900  they  averaged  $1,260,000,  and  from  1901 
to  1905  they  averaged  $1,530,000;  1906  —  $2,352,000. 

CONCLUSIONS    CONCERNING    THE    PENNSYLVANIA    LOW    RATE    ON 

INTANGIBLES 

(1)  The  system  is  a  decided  improvement  upon  the  old,  dis- 
reputable general  property  tax. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  175 

(2)  The  success  of  the  Pennsylvania  system  is  most  marked 

(a)  Where  it  is  collected  at  the  source,  as  in  the  case  of 
the  corporate  loans  by  methods  which  make  evasion  very 
difficult ; 

(b)  Where  it  is  collected  from  mortgages  on  real  estate, 
in  which  case  the  law  makes  rigorous  provision  for  ascer- 
taining the  ownership  of  this  class  of  property ; 

(c)  Where  it  is  collected  from  trust  companies  upon  per- 
sonal property  which  they  hold  in  trust. 

(3)  The  weakest  part  of  the  law  is  that  part  dealing  with  in- 
dividuals who  list  their  intangibles.     As  pointed  out  above,  the 
experience  of  Pennsylvania  in  regard  to  this  class  is  quite  far 
from  satisfactory. 

(4)  The  experience  of  Pennsylvania   seems  to  show  that  a 
four  mill  rate  on  intangibles  will  not  drive  this  class  of  property 
out  of  the  State.     At  least  in  the  case  of  corporate  loans,  even 
though  it  is  collected  only  on  securities  held  in  Pennsylvania, 
the  four  mill  tax  does  not  drive  this  property  out  of  the  State. 
In  recent  years  corporations  have  often  voluntarily  assumed  the 
payment  of  the  tax  in  order  to  be  able  to  advertise  their  bonds 
as  being  nontaxable  in  Pennsylvania. 

THE  EXPERIMENT  OF  MARYLAND  WITH  THE  LOW  RATE  ON 
INTANGIBLES 

For  nineteen  years  Maryland  has  taxed  certain  forms  of  in- 
tangible personalty  at  approximately  four  and  eight-tenths  mills. 
It  has  imposed  a  uniform  rate  of  three  mills  for  local  purposes, 
and  for  State  purposes  the  general  property  rate,  which  has 
varied  between  1.6  mills  and  3.1  mills.  By  recent  amendment, 
adopted  this  last  year,  Maryland  now  imposes  a  uniform  rate  of 
three  mills  for  local  purposes,  and  also  a  uniform  rate  of  one  and 
five-tenths  mills  for  State  purposes. 

WHAT  THE  LAW  APPLIES  TO 

It  is  important  to  note  that  the  law  applies  only  to  certain 
forms  of  intangibles,  including  the  following: 

(1)   All  bonds  and  certificates  of  indebtedness  issued  by 
corporations    (except  State,   county  and  municipal  bonds). 


176  STATE  OF  NEW  YORK 

(2)   Stocks  of  foreign  corporations,  only  on  the  condition 
that  interest  is  paid  during  the  year. 

WHAT  THE  LAW  DOES  NOT  APPLY  TO 

(1)  Shares  of  Maryland  corporations; 

(2)  Ordinary  mortgages; 

(3)  Book  accounts  of  merchants; 

(4)  Holdings  of  savings  banks; 

(5)  Deposits  in  banks; 

(6)  State,  county  and  municipal  bonds; 

(7)  Holdings  of  domestic  corporations  under  certain  con- 
ditions ; 

(8)  Holders  of  nonproductive  bonds  and  foreign  stock. 

KESULTS  OF  MARYLAND'S  EXPERIENCE  WITH  THE  Low  KATE  ON 

INTANGIBLES 

The  success  of  Maryland  with  the  low  rate  tax  has  been  very 
marked  in  spots.  The  following  figures,  indicating  the  amount 
of  intangible  personalty  brought  upon  the  books,  are  instructive: 

They  include  the  assessment  of  interest-paying  bonds,  certifi- 
cates of  indebtedness,  stocks  of  foreign  corporations,  in  Baltimore 
city,  in  round  numbers. 

1896 $6,000,000 

1897 58,700,000 

1900 65,700,000 

1902 89,900,000 

1905 104,000,000 

1907 151,000,000 

1910 158,000,000 

1912 179,000,000 

1914 192,000,000 

N.  B. —  It  must  be  noted,  of  course,  that  this  success  was  at- 
tained under  a  rate  (three  mills)  which  is  only  a  fraction  of  the 
general  property  rate,  and  that  it  was  attained  in  Baltimore  city 
under  the  direction  of  an  unusually  efficient  public  servant  (Judge 
Leser),  and  under  more  favorable  conditions  of  administration 
than  existed  for  the  State  at  large. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  177 

The  yield  of  the  tax  of  course  has  not  been  in  proportion  to  the 
increase  in  the  amount  of  the  intangibles  listed  as  a  result  of 
the  low  rate. 


WHERE  THE  MARYLAND  LAW  HAS  FAILED 

The  Maryland  tax  officials  have  reported  utter  failure  in  some 
counties.  The  reason  given  for  this  failure  is  weak  adminis- 
tration. The  lamentable  lack  of  success  in  some  of  the  rural 
counties  as  compared  to  the  city  of  Baltimore  was  one  of  the 
principal  arguments  which  led  to  the  creation  of  the  tax  commis- 
sion with  centralized  power.  Moreover,  "  nearly  one-third  of  the 
revenue  from  this  three  mill  tax  in  Baltimore  comes  from  a  few 
railroads  that  are  incorporated  under  the  laws  of  Maryland  and 
own  the  shares  of  companies  outside  the  State."  (Stenographer's 
Minutes,  p.  1044.)  It  must  be  remembered  also  that  Maryland 
taxes  under  this  law  the  holdings  of  insurance  companies. 

CONCLUSIONS  CONCERNING  THE  MARYLAND  Low  RATE  ON 
INTANGIBLES 

(1)  As  compared  with  the  old,  broken-down  general  property 
tax,  the  Maryland  plan  represents  an  unqualified  improvement. 

(2)  However,   Maryland's   experience   indicates  that   even   a 
rate  as  low  as  three  mills  cannot  be  collected  under  decentralized 
administration.     The  local  assessors  cannot  be  depended  upon, 
unless  closely  supervised  or  controlled  by  a  centralized  body. 

(3)  It  can  be  enforced  with  success  in  a  city  like  Baltimore, 
under  a  high  type  of  personnel. 

(4)  The  securities  of  foreign  corporations  can  be  listed  where 
administration  is  of  high  type. 

FAILURE  OF  Low  RATE  ON  INTANGIBLES  IN  MARYLAND 

(Quoted   from   1913   Maryland  Report  of   Special   Tax 
Commission,  pp.  27  and  28.) 

"  Maryland  taxes  the  stock  of  domestic  corporations  *  *  * 
differently  from  the  stock  of  foreign  corporations,  and  our  dis- 
cussion here  refers  only  to  the  corporate  bonds  and  the  certifi- 
cates of  indebtedness  of  all  corporations  and  the  stocks  of  all  cor- 


178  STATS  OF  NEW  YOKE 

porations  now  taxed  under  Article  81,  Section  214,  at  the  full 
state  rate  and  a  uniform  local  rate  of  30  cents. 

"  We  realize  that  this  method  of  classification  and  the  imposi- 
tion of  the  30-cent  local  rate  has  been  the  subject  of  favorable 
comment  by  students  of  taxation,  and  many  reports  have  cited 
this  State  as  an  example  of  a  low  rate  producing  more  revenue 
than  a  high  rate  by  reason  of  the  fact  that  greater  assessment  is 
thereby  obtained. 

"  This  conclusion  is  correct  only  in  part.  When  this  class  of 
property  was  taxed  the  full  local  rate  (prior  to  1896)  Baltimore 
City  had  $6,000,000  assessed,  whereas  it  now  has  $179,412,676 
on  the  books.  The  result  throughout  the  State  has  not  shown 
anything  like  this  change.  Even  now,  but  a  small  part  of  this 
kind  of  property  is  assessed  in  Baltimore  City  and  less  in  the 
counties. 

"  The  amount  of  securities  taxed  in  each  county  is  shown  in 
another  part  of  this  report.  Four  counties  of  the  State,  viz., 
Calvert,  Caroline,  Garrett  and  Worcester,  have  not  a  single  as- 
sessment against  this  class  of  property. 

"  !N".  B. —  It  is  a  well  known  fact  that  a  large  part  of  the 
wealth  of  our  people  at  the  present  time  consist  of  securities 
subject  to  this  rate  of  taxation,  and  there  is  no  doubt  that  in 
every  community  a  vast  amount  of  this  class  of  property  escapes 
taxation." 

CONNECTICUT  EXPERIENCE  WITH  THE  LOW  RATE  ON  INTANGIBLES 

Connecticut's  tax  on  choses  in  action  has  been  in  existence 
since  1889,  the  rate  being  at  first  two  mills,  and  since  1897  four 
mills.  The  substance  of  the  law  is  as  follows : 

Any  person  may  send  to  the  office  of  the  Treasurer  of  the 
State  any  bond,  note  or  other  chose  in  action,  and  pay  a  tax  of 
2  per  cent  on  the  face  amount  for  five  years,  or  for  a  greater  or 
less  number  of  years  at  the  same  rate.  "  The  Treasurer  shall 
thereupon  make  an  endorsement  upon  said  bond,  note,  or  other 
chose  in  action,  or  shall  give  a  receipt  for  the  tax  thereon,  de- 
scribing said  bond,  note  or  chose  in  action,"  certifying  that  the 
same  is  exempt  from  all  taxation  for  the  period  of  five  years,  or 
for  such  longer  or  shorter  period  for  which  a  proportionate  tax 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  179 

has  been  paid.  The  Treasurer  shall  keep  a  record  of  endorse- 
ments, together  with  the  name  and  address  of  the,  party  present- 
ing them,  and  the  date  of  registration.  The  Treasurer  annually 
sends  to  the  town  clerk  of  each  town  a  description  of  all  such 
bonds,  etc.,  registered  by  persons  residing  in  such  town,  indica- 
ting that  such  bonds,  etc.,  are  exempt  from  all  taxation  in  the 
state  for  the  period  during  which  the  tax  is  enacted. 

FISCAL  RESULTS  OF  THE  TAX  ON  CHOSES  IN  ACTION  (STATED  IN 
ROUND  NUMBERS) 

Number  of  Amount  of 


Year 
1908  

notes,  etc. 
35,  000 

notes  registered 
$38,  000,  000 

Tax 
$160,  000 

1909 

35,  000 

37,  000,  000 

161,  000 

1910  

37,  000 

41,  000,  000 

167,  000 

1911 

36,  000 

39,  000,  000 

159,  000 

1912  

37,  000 

40,  000,  000 

161,  000 

1913 

44,  000,  000 

176,  000 

1914  

61,  000,  000 

244,  000 

1915  . 

100,  000,  000 

400,  000 

As  indicated  above,  the  yield  of  this  tax  is  not  strikingly  large, 
but  on  the  whole  the  tax  seems  to  have  been  fairly  successful. 
The  Tax  Commission  of  1911-1912  speaks  of  the  tax  as  follows: 

"  The  present  statute  permits  the  registration  of  choses 
in  action  in  the  treasurer's  office  by  the  bearer,  and  does  not 
require  the  owner's  name  to  appear  on  the  records  in  that 
office,  nor  to  be  sent  to  the  town  clerk  of  the  town  in  which 
the  owner  resides.  It  is  customary  for  banks  and  trust  com- 
panies to  pay  the  tax  on  a  large  amount  of  securities  owned 
by  the  different  clients;  the  registration  of  the  same  being 
in  the  name  of  the  bank  instead  of  in  the  name  of  the  origi- 
nal owner. 

"  Section  2325  requires  the  state  treasurer  to  send  to  the 
town  clerks  the  list  of  choses  in  action  so  registered  in  the 
name  of  the  bearer,  but  not  of  the  owner. 

"  This  makes  it  difficult  for  the  assessors  to  check  the  tax- 
ation of  bonds  under  this  procedure  in  the  name  of  the 


180  STATE  OF  NEW  YORK 

MINNESOTA'S  EXPERIENCE  WITH  THE  THREE-MILL  TAX  ON 
INTANGIBLES 

In  1911  Minnesota  enacted  a  law  which  provides  for  the  sepa- 
rate listing  of  the  following: 

(2)  Promissory  notes; 

(3)  Bonds,    other    than    mortgages    on    Minnesota    real 
estate ; 

(4)  Muncipal  bonds; 

(5)  Book  accounts; 

(6)  Annuities; 

(Y)   Royalties  and  all  claims  and  demands  for  money  and 
other  things  of  value. 
The  law  does  not  apply  to  the  following: 

(1)  Money  and  credits  belonging  to  incorporated  banks; 

(2)  Shares  of  stock; 

(3)  Mortgages  secured  within  the  state  (the  latter  con- 
tinuing subject  to  the  registry  tax)  ; 

(4)  Municipal  bonds  (which  are  exempt). 

COLLECTION  AND  APPORTIONMENT  OF  THE  TAX 
The  return  of  moneys  and  credits  is  made  on  a  separate  sched- 
ule, and  it  is  specifically  required  that  the  taxpayer  make  oath 
as  to  the  correctness  of  his  return.     The  tax  is  paid  into  the 
county  treasury,  as  other  taxes,  but  is  apportioned  as  follows: 
One-sixth  to  the  revenue  fund  of  the  state ; 
One-sixth  to  the  county  revenue  fund ; 
One-third  to  the  city  or  town ; 
One-third  to  the  school  district  in  which  the  property  is 


DEDUCTION  OF  DEBTS 

Under  the  old  law,  deductions  for  debt  were  allowed  as  an  off- 
set to  credits,  but  under  the  3-mill  tax  no  deductions  for  debts 
are  allowed. 

RESULTS  OF  THE  LAW 

Minnesota's  experience  with  the  low  rate  tax  on  intangibles  is 
similar  to  that  of  other  states.  As  a  means  of  bringing  upon 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  181 

the  tax  rolls  a  large  amount  of  intangible  personalty,  it  has  proved 
successful,  but  as  a  revenue  producer  it  cannot  be  said  to  have 
been  a  huge  success.  The  following  table  indicates  its  success  in 
listing  property: 


Year 
1910 

Number 
assessed 

6  000 

Total 
assessmen1 

$13  000  000 

Per  cent  in- 
crease from 
1910 

1911  

41  000 

115  000  000 

730 

1912 

50  000 

135  000  000 

873 

1913  

57  000 

156  000  000 

1  027 

1914. 

73  000 

196  000  000 

1  309 

FISCAL  RESULTS 

The  foregoing  statistics,  indicating  the  striking  increase  in  the 
total  assessment  of  intangible  personalty,  are  entirely  mislead- 
ing, unless  one  refers  to  the  actual  revenue  producing  results. 

Minnesota's  revenue  in  1910,  the  year  preceding  the  enactment 
of  the  three-mill  tax,  was  approximately  $379,000.  In  the  fol- 
lowing year,  when  the  total  assessment  was  increased  more  than 
tenfold,  the  actual  yield  of  the  tax  was  only  $347,000,  or  a  net 
loss  to  the  treasury  of  about  $32,000.  Since  1911  the  yield  of 
the  tax  has  gradually  increased. 

From  the  point  of  view  of  public  morals,  the  Minnesota  low 
rate  on  intangibles  may  be  considered  a  success,  if  we  mean  by 
"  success  "  the  listing  of  a  large  amount  of  intangible  personalty 
formerly  escaping  taxation.  However,  judged  from  a  revenue 
point  of  view,  the  success  has  been  by  no  means  as  great.  It  is 
true,  however,  that  the  tax  base  has  been  broadened,  more  tax- 
payers have  been  reached  and  thus  there  is  a  better  distribution. 

Rhode  Island  and  Iowa  also  have  a  low  tax  on  intangibles. 
The  Rhode  Island  Commission  expresses  itself  as  well  satisfied 
with  the  results.  In  Iowa  under  a  five-mill  tax  the  revenue  at 
first  showed  a  marked  falling  off,  but  seems  now  to  have  reached 
the  yield  formerly  received  from  the  personal  property  tax. 

GENERAL  CONCLUSIONS  CONCERNING  THE  LOW  RATE  UPON 
INTANGIBLES 

(A)  ECONOMIC  JUSTICE. —  Most  tax  authorities  agree  that 
the  present  low  rates  of  3  to  5  mills  upon  tangibles  are  in 
accord  with  economic  justice.  The  application  of  the  general 


182  STATE  OF  NEW  YOKK 

property  rate  in  the  various  states  of  the  Union  has  in  no 
single  instance  administered  justice  either  as  between  intangible 
and  tangible  personalty,  as  between  personalty  and  realty,  or  as 
between  classes  within  the  community.  The  general  property 
rates,  where  enforced,  have  been  confiscatory,  but  the  present  rate 
of  3  to  5  mills  with  few  exceptions  is  adjusted  to  the  income- 
bearing  capacity  of  the  property. 

(B)  EFFECT   UPON   PUBLIC   MORALS. — As  to  the   degrading 
effect  upon  public  morals  of  an  attempt  to  enforce  the  general 
property  tax,  all  authorities  agree.     When  members  of  the  com- 
munity are  invited  by  an  unjust  law  to  beat  an  unjust  tax,  they 
naturally  fall  into  the  habit  of  attempting  to  beat  all  taxes.     In 
Baltimore,  where  Judge  Leser  has  had  large  opportunity  to  notice 
the  effect  of  the  low  rate  tax,  the  general  attitude  of  the  tax- 
payer, not  only  in  regard  to  the  tax  upon  intangible  property, 
but  also  in  regard  to  all  other  taxes,  seems  to  reflect  a  much  more 
wholesome  condition. 

(C)  SUCCESS  AS  A  REVENUE  PRODUCER. —  The  success  of  the 
low  rate  tax  has  been  remarkable  rather  for  the  large  amount  of 
intangible  property  put  upon  the  books,  than  for  the  actual  net 
increase  in  the  yield  of  the  tax.     However,   in  Maryland  and 
Pennsylvania,  where  peculiar  conditions  exist,  there  has  been  a 
substantial  increase  in  the  revenue  produced. 

(D)  CONDITIONS  NECESSARY  TO  ITS  SUCCESS. —  Whenever  the 
low  rate  has  succeeded,  either  one  or  all  of  the  following  conditions 
have  prevailed: 

(a)  A  large  degree  of  central  administration  or  supervision ;  or 

(b)  A  type  of  tax  official  more  zealous  and  more  efficient  than 
the  average; 

(c)  A  provision  for  reaching  the  source  without  reliance  upon 
self -assessment   (and  this  has  been  possible  only  in  the  case  of 
particular  classes  of  intangibles). 

The  Committee  has  given  serious  consideration  and  much 
thought  to  the  low  tax  on  intangibles  plan,  not  only  because  of  its 
own  intrinsic  merit  and  superiority  over  the  present  system,  but 
because  of  the  earnestness  with  which  it  was  pressed  by  its  advo- 
cates. Nevertheless,  while  conceding  its  good  features,  we  do  not 
believe  that  this  tax  system  will  solve  our  New  York  problem.  We 
base  this  judgment  on  the  following  grounds: 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  183 

(1)  While  the  low  rate  will,  to  a  great  extent,  do  away  with 
the  temptation  on  the  part  of  taxpayers  to  evade  the  tax,  never- 
theless it  is  idle  to  hope  that  any  great  amount  of  personal  prop- 
erty will  find  its  way  on  the  rolls  unless  the  owner  he  compelled 
either  to  produce  or  to  disclose  his  holdings.     A  three  or  a  four 
mill  rate  is,  of  course,  much  lower  than  the  present  one,  yet  even 
so,  it  represents  a  fairly  high  rate  on  income, —  and  in  the  case  of 
some  securities  anywhere  from  6  to  10  per  cent.     A  10  per  cent 
tax  on  income  is  sufficient  to  inspire  the  average  man  with  a  desire 
to  escape  therefrom.     There  are  two  well-recognized  methods  of 
compelling  disclosure.     The  first  is  to  require  the  taxpayer  to  fur- 
nish the  assessor  with  a  list  of  his  taxable  property.     But  even  a 
modified  listing  system  is  so  contrary  to  our  traditional  public 
policy  and  so  obnoxious  to  the  great  majority  of  our  citizens,  that 
we  do  not  believe  that  public  opinion  would  sanction  its  adoption. 
The  second  method  is  that  of  voluntary  registration,  such  as  is 
found  in  Connecticut.     This  plan  contemplates  the  retention  of 
the  personal  property  tax  at  the  general  property  rate,  but  per- 
mits the  taxpayer  to  register  his  securities  annually,  to  pay  the  two 
three  or  four  mill  tax,  as  the  case  may  be,  and  so  to  exempt  his 
property  from  the  local  personal  property  tax.      The  difficulty 
with  this  scheme  is  that  the  threat  of  the  enforcement  of  the  per- 
sonal property  tax  at  the  general  property  rate  can  never  be  made 
severe  enough  to  compel  all  of  the  property,  or  even  the  greater 
part  of  it  to  pay  the  lower  tax.    Indeed,  under  the  circumstances, 
there  is  hardly  incentive  enough  on  the  part  of  the  local  assessor 
to  induce  him  to  make  any  very  strenuous  effort  to  furnish  the 
compelling  force. 

(2)  In  the  second  place,  the  experience  of  all  the  states  that 
have  tried  it  show  conclusively  that  the  low  rate  on  intangibles 
cannot  be  made  a  success  unless  the  administration  be  taken  away 
from  the  local  assessor  and  placed  in  the  hands  of  the  State  Tax 
Commission,  or  some  other  central  administrative  body.     This  is 
frankly  admitted  by  the  advocates  of  the  plan.     This  in  itself 
is  an  insuperable  objection  to  its  adoption  in  New  York,  because 
under  the  terms  of  our  present  Constitution  the  function  of  as- 
sessing personal  property,  even  at  a  lower  rate,  cannot  be  taken 
away  from  the  local  assessor. 


184:  STATE  OF  NEW  YORK 

(3)  The  application  of  the  tax  would  be  necessarily  much  more 
limited  than  in  some  of  our  sister  states,  because  of  the  great 
number   of   securities   at   present   exempt   which   could   not   be 
reached  even  under  the  new  tax.     Thus,  for  example,  it  is  hardly 
likely  that  mortgages  would  be  included,  or  the  securities  held  by 
insurance  companies,  or  savings  banks.     It  was  estimated  by  two 
well  qualified  witnesses  who-  appeared  before  our  Committee  that 
the  exempt  securities  in  the  State  of  New  York  amounted  to  no 
less  than  three  billion  dollars.     When  we  add  to  these  facts  the 
knowledge  of  the  j)eculiar  conditions  in  New  York  City  that 
render  it  so  easy  for  the  taxpayer  to  change  his  residence,  it  is 
clear  that  sufficient  revenue  could  not  be  obtained  greatly  to 
alleviate  the  burden  borne  by  real  estate  and  other  forms  of  tax- 
paying  property. 

The  State  of  Pennsylvania  is  the  only  one  of  the  states  having 
the  low  tax  on  intangibles  where  general  conditions  are  in  any 
way  analogous  to  those  existing  in  New  York,  and  in  Pennsylvania 
it  has  been  found  that,  except  where  the  tax  is  collected  at  the 
source,  it  is  not  particularly  successful. 

(4)  The  low  tax  on  intangibles  is  a  property  tax,  and  the  whole 
modern  tendency,  particularly  in  the  business  world,  is  to  get  away 
from  property  as  a  basis  of  assessment,  and  to  look  more  and  more 
to  income. 

(5)  The  low  tax  on  intangibles  would  in  no  sense  solve  our 
corporation  tax  problem.     In  fact,  Mr.  Alfred  E.  Holcomb,  who 
is  one  of  those  who  must  strenuously  urged  its  adoption  before 
our  Committee,  admitted  that  when  we  come  to  general  business 
corporations,  it  would  be  necessary  to  supplement  the  measure 
by  some  such  tax  as  the  Canadian  business  tax. 

CHAPTER  IV 
THE  INCOME  TAX 

The  first  step  in  the  construction  of  any  scientific  form  of 
taxation  is  a  careful  consideration  of  the  fundamental  principle 
underlying  all  sound  public  finance.  Our  studies  have  led  us  to 
the  conclusion-  that  no  fairer  principle  of  taxation  can  be 
adopted  than  that  each  man  shall  be  called  upon  to  contribute  to 
the  support  of  government  in  proportion  to  his  ability  to  pay. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  185 

Adam  Smith  laid  down  as  the  first  canon  of  taxation  that  the  "  sub- 
jects of  every  state  ought  to  contribute  towards  the  support  of 
government  as  nearly  as  possible  in  proportion  to  their  respec- 
tive abilities;  that  is,  in  proportion  to  the  revenue  which  they 
respectively  enjoy  under  the  protection  of  the  state.'7  This 
canon,  as  enunciated,  has  stood  the  test  of  more  than  a  century  of 
criticism,  and  today  comes  as  near  universal  acceptance  as  any 
principle  of  taxation.  As  ability  best  represents  the  proportion 
which  each  man  is  called  upon  to  pay,  so,  in  turn,  ability  to  pay 
itself  is  best  determined  by  the  income  or  revenue  which  a  man 
enjoys. 

Taxes  are  paid  out  of  income.  All  taxes  have  to  be  paid  either 
out  of  income  or  capital.  To  pay  them  out  of  capital  is  to  destroy 
the  future  source  of  income,  both  to  the  individual  and  the  state 
and  if  persisted  in  over  a  long  period  of  time,  to  wipe  out  capital 
itself.  This  principle  has  repeatedly  been  recognized  in  our 
various  taxes.  In  taxing  property  we  have  done  so  in  the  belief 
that,  in  the  main,  it  was  a  fair  criterion  of  taxable  income ;  and  this 
was  true  when  our  property  tax  system  was  originally  adopted 
in  a  simpler  state  of  society.  But  to-day  property  alone  is  not 
a  complete  measure  of  the  total  income  enjoyed,  and  if  the  above 
enunciated  principle  be  sound,  it  is  necessary  to  abandon  the  in- 
direct property  method  of  reaching  income,  and  to  tax  income 
directly.  This  conclusion  has  received  widespread  recognition. 
There  is  hardly  a  civilized  country  to-day  where  the  income  tax 
does  not  make  up  an  important  part  of  the  tax  system.  Thus  it 
is  in  use  in  nearly  every  country  in  Europe,  notably  in  Germany, 
England,  France,  Austria  and  Italy.  At  one  time  every  one  of 
these  countries  had  a  personal  property  tax,  but  as  its  failure 
became  recognized  it  was  abandoned  and  to-day  they  all  resort  to 
the  income  tax. 

EXPERIENCE  IN  THE  UNITED  STATES 

From  time  to  time  various  states  in  the  Union,  more  particu- 
larly the  Southern  States,  have  enacted  income  tax  laws  (of  one 
kind  or  another)  but  no  really  successful  attempt  has  been  made 
to  enforce  them.  The  failure  which  has  attended  their  efforts  has 
given  rise  to  a  misconception  as  to  the  possibility  of  enforcing 
an  income  tax  in  this  country.  It  might  as  well  be  noted  here  that 


186  STATE  OF  NEW  YORK 

the  income  tax  is  not  likely  to  be  any  more  successful  than  the 
personal  property  tax  unless  adequate  means  of  enforcement  are 
provided.  This  fact  was  conclusively  demonstrated  by  the  earlier 
experiences  in  this  country.  However,  the  Wisconsin  experiment 
proved  beyond  controversy  that  the  income  tax  could  be  adminis- 
tered with  complete  success  under  a  centralized  system  of  adminis- 
tration and  with  reasonable  provisions  for  its  enforcement.  In  this 
respect  it  merely  confirmed  what  had  amply  been  demonstrated  in 
Europe. 

The  Wisconsin  income  tax  was  devised  as  a  substitute  for  the 
personal  property  tax,  the  inequalities  and  injustice  of  which 
were  felt  even  more  keenly  than  in  New  York. 

WISCONSIN  INCOME  TAX 

The  principal  facts  in  regard  to  the  Wisconsin  income  tax  have 
been  clearly  set  forth  in  the  annual  reports  of  the  Wisconsin  Tax 
Commission  and  in  papers  presented  before  the  National  Tax 
Association.  The  following  data  has  been  largely  quoted  from 
these  sources: 

History 

Adopted  in  1911.     Has  been  collected  in  1912,  1913  and  1914. 

General  Characterization  of  the  Tax 

The  Wisconsin  income  tax  differs  in  several  important  particu- 
lars from  any  other  income  tax  ever  adopted  in  this  country.  It 
is,  therefore,  important  to  note  the  following  salient  features: 

(a)  It  is  not  an  additional  tax,  but  a  substitute  for  the 
tax  on  certain  classes  of  personal  property  and  particularly 
moneys  and  credits. 

(b)  Any  personal  property  tax  which  a  person  pays  is 
subtracted  from  his  income  tax.     This  is  popularly  referred 
to  as  the  "  personal  tax  offset." 

(c)  It  is  not  a  tax  on  the  whole  income  of  persons  en- 
gaged in  business  within  and  without  the  State,  but  is  con- 
fined practically  to  income  derived  from  property  located 
and  business  transacted  within  the  State. 

(d)  It  is  not  a  state  tax.     Seventy  per  cent  of  the  tax 
goes  to  the  *own,  city  or  village  in  which  it  is  collected,  20 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  187 

per  cent  to  the  county,  and  ten  per  cent  to  the  state.  Out  of 
this  ten  per  cent,  the  State  pays  practically  all  the  expenses 
of  administration. 

(e)  The  rates  imposed  upon  individuals  differ  materially 
from  those  imposed  upon  corporations. 

The  rate  upon  individuals  and  co-partnerships  is  1  per 
cent  on  the  first  thousand  dollars  of  taxable  income;  1*4 
per  cent  upon  the  second  thousand  dollars,  and  rises  gradu- 
ally to  6  per  cent,  where  it  stops. 

The  rate  upon  corporations,  up  to  a  year  ago,  was  deter- 
mined by  the  relation  between  the  taxable  income  and  the 
assessed  value  of  the  property  used  and  employed  in  the  ac- 
quisition of  such  income. 

(For  detail  of  present  law,  see  supra.} 

(f)  The  principle  of  collection  at  source  has  been  exten- 
sively  applied.      Thus   the   corporation   pays   on    its   total 
profits,  and  the  individual  stockholder  is  not  taxed  upon  his 
dividend.     So  also  the  interest  paid  upon  bonds  of  corpora- 
tions subject  to  the  Wisconsin  income  tax  is,  for  practical 
purposes,  taxed  directly  to  the  corporation  and  exempted  to 
the  individual  bondholder. 

(g)  The  administration  of  the  law  is  centralized  in  the 
Tax  Commission  and  is  not  left  to  local  officials.     The  as- 
sessors of  income  are  appointed  after  civil  service  examina- 
tions and  are  entirely  independent  of  local  influences. 

Enacted  as  a  Substitute  for  the  General  Property  Tax  on  the 

Following  Forms  of  Personalty 

(a)  Intangible  personalty.  Coincident  with  the  passage  of  the 
Income  Tax  Law,  the  general  laws  were  amended  so  as  to  exempt 
from  taxation  — 

( 1 )  Moneys, 

(2)  Stocks  and  bonds, 

(3)  All  debts  due  from  solvent  debtors,  whether  on  ac- 
count, note,  contract,  bond,  mortgage,  or  other  security,  or 
whether  such  debts  are  due  or  to  become  due. 

(&)  Tangible  Personalty.  In  order  that  the  owner  of  tangible 
personal  property  should  not  be  placed  at  a  disadvantage  as  com- 
pared with  the  owner  of  intangibles,  the  Income  Tax  Law  pro- 


188  STATE  OF  NEW  YORK 

vides  that  the  receipts  for  general  taxes  paid  on  personal  property 
may  be  used  as  cash  in  paying  for  the  income  tax.  This  is  called 
offsetting. 

What  is  Taxable  Under  the  Wisconsin  Income  Tax 
General  rule  —  all  income  derived  from 

(a)  Persons, 

(b)  Property, 

(c)  Business, 

having  an  actual  or  constructive  situs  in  the  State. 

In  detail  —  all  income,  other  than  by  statute  exempt ; 

(a)  which  residents  of  the  State  receive  from  within  or 
without  the  State, 

(b)  as  well  as  that  which  nonresidents  receive  from  within 
the  State, 

is  taxable. 

Where  a  resident  receives  income  partly  from  within  and  partly 
from  without  the  State  (other  than  income  derived  from  rentals, 
stocks,  bonds,  and  securities,  or  evidence  of  indebtedness),  said 
resident  is  taxed  on  a  proportion  of  the  total  income,  to  be  de- 
termined by  the  amount  of  property  from  which  it  is  derived, 
located  or  to  be  acquired  within  the  State  and  by  the  business 
transacted  within  or  without  the  State. 

In  determining  taxable  income,  the  general  rule  is  followed 
that  income  from  property  which  is  taxable  at  its  situs  also  fol- 
lows the  situs  of  the  property,  and  income  derived  from  property- 
taxable  at  the  domicile  of  the  owner  also  follows  the  residence 
of  the  recipient  of  the  income.  Thus  the  resident  is  not  taxable 
on  income  from  rents  or  royalties  arising  in  another  State,  but  he 
is  taxable  on  that  derived  from  securities,  regardless  of  their 
origin ;  while  rents  and  royalties  arising  in  Wisconsin  are  taxable 
to  nonresidents. 

What  Income  Is  Not  Taxable 

(a)  Residents  are  not  taxable  on  rents  or  royalties  arising  in 
another  State,  or,  in  other  words,  on  any  income  derived  from  prop- 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  189 

erty  having  its  situs  beyond  the  jurisdiction  of  the  State  of  Wis- 
consin. 

Definition  of  Income 

Incomes  includes  "  rent,  interest,  wages,  dividends,  profits,  and 
royalties,  and  all  other  income."  !N".  B. —  It  also  includes  "  esti- 
mated rental  of  resident's  property  occupied  by  one  thereof." 

Income  of  Individuals  Exempted  from  Taxation 

(1)  (a)   To  an  individual  income  up  to  and  including  $800 ; 

(b)  To  husband  and  wife,  $1,200 ; 

(c)  For  each  child  under  the  age  of  eighteen  years,  $200; 

(d)  For  each  additional  person,  for  whose  support  the  tax- 

payer is  legally  liable  and  who  is  entirely  dependent 
upon  the  taxpayer  for  his  support,  $200 ; 

(e)  The  aforesaid  exemptions  do  not  apply  to  incomes  de- 

rived from  sources  within  the  State  by  nonresidents 
thereof,  nor  to  firms,  copartnerships,  corporations, 
joint-stock  companies,  nor  associations. 

In  computing  the  exemptions  and  the  amounts  of  taxes  pay- 
able, the  income  of  a  wife  is  added  to  the  income  of  her  husband, 
and  the  income  of  each  child  under  eighteen  years  of  age  to  that 
of  its  parent  or  parents,  when  said  wife  or  child  is  not  living 
separately  from  said  husband,  parent,  or  parents. 

(2)  Income  of  any  mutual  savings  or  loan  and  building  asso- 
ciation, or  of  any  religious,  scientific,  educational,  benevolent,  or 
other  association  or  individuals  not  organized  or  conducted  for 
pecuniary  profit. 

(3)  Incomes  derived  from  property  and  privileges  by  persons 
now  required  by  law  to  pay  taxes  or  license  fees  directly  into  the 
treasury  of  the  State  in  lieu  of  taxes,  and  such  persons  shall  con- 
tinue to  pay  taxes  and  license  fees  as  heretofore. 

(4)  Income  received  by  the  United  States,  the  State,  and  all 
counties,  cities,  villages,  school  districts,  or  other  political  units 
of  the  State. 

Rates  of  Wisconsin  Income  Tax 

Individuals.  On  taxable  incomes  of  individuals,  firms,  or  co- 
partnerships — 


* 


190  STATE  OF  NEW  YORK 

Rate  True  rate  on 

per  cent  whole  amount 

On  the  first  $1,000  or  portion  thereof 1  l . 

second  1%  1.125 

third 11/2  1.25 

fourth 1%  1.375 

fifth   2  1.5 

sixth 21/2  1.6667 

seventh 3  1 . 8571 

eighth 3i/2  2.0625 

ninth 4  2.2778 

tenth   4V2  2.5 

eleventh  5  2 . 7273 

twelfth 5y2  2. 7582 

twentieth 6  4 . 175 

All  additional  amounts 6 


Deductions  from  Incomes  of  Individuals  and  Co-partnerships 

In  the  case  of  individuals,  firms  and  copartnerships  the  follow- 
ing deductions  from  the  gross  income  are  allowed : 

(1)  Necessary  expenses,  including  salaries  or  wages,  of  less 
than  $700. 

(2)  Salaries  or.  wages  of  $700  or  more,  providing  the  name 
and  address  of  the  employee  is  reported. 

(3)  Uninsured  losses  during  the  year. 

(4)  Dividends  received  from  other  persons  whose  income  has 
been  taxed  by  the  State,  providing  the  amount  of  said  dividends 
has  been  reported  by  the  person  taxed  at  the  time  of  the  assess- 
ment. 

(5)  Interest  received  from  bonds  or  other  securities  exempt 
from  taxation  under  the  laws  of  the  United  States. 

(6)  Amount  paid  in  taxes,  other  than  inheritance  taxes,  and 
paid  upon  the  property  or  business  from  which  the  income  to  be 
taxed  is  derived. 

(7)  All  inheritances,  devises,  and  bequests  on  which  inherit- 
ance tax  has  been  paid. 

(8)  Life  insurance  received  to  the  amount  of  $10,000,  if  the 
taxpayer  was  legally  dependent  on  the  decedent. 

(9)  Current  interest  paid  on  existing  indebtedness,  providing 
taxpayer  reports  the  name  and  address  of  the  creditor. 

(10)  Compensation    or   pensions    received    from    the    United 
States. 


" 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  191 


Income  from  Interstate  Business 
The  following  quotation  from  the  Wisconsin  Income  Tax  Law 
explains  how  incomes  from  interstate  business  are  apportioned: 

(1)  "In  determining  taxable  income,   rentals,   royalties 
and  gains  or  profits  from  the  operation  of  any  firm,  mine  or 
quarry  shall  follow  the  situs  of  the  property  from  which  de- 
rived, and 

(2)  income  from  personal  service  and  from  land  contracts, 
mortgages,  stocks,  bonds  and  securities  shall  follow  the  resi- 
dence of  the  recipient. 

"  With  respect  to  other  income,  persons  engaged  in  busi- 
ness within  and  without  the  State  shall  be  taxed  only  upon 
such  income  as  is  derived  from  business  transacted  and  prop- 
erty located  within  the  State,  which  may  be  determined  by 
allocation  and  separate  accounting  for  such  income  when 
made  in  form  and  manner  prescribed  by  the  Tax  Commission, 
but  otherwise  shall  be  determined  in  the  manner  specified  in 
subdivision  (e)  of  subsection  Y  of  section  I770b  of  the 
statutes  as  far  as  applicable." 


The  section  of  the  statute  referred  to  authorizes  a  computation 
by  taking  the 

(1)  gross  business  in  dollars  of  the  corporation  in  the 
State  and  adding  the  same  to  the 

(2)  full  value  of  the  property  of  the  corporation  located 
in  the  State. 

The  sum  thus  obtained  is  used  as  the  enumerator  of  a  fraction 
—  the  denominator  of  which  is  to  consist  of  the 

(1)   total  gross  business  in  dollars  of  the  corporation,  both 

I  within  and  without  the  State,  added  to 
(2)  the  full  value  of  the  property  of  the  corporation 
within  and  without  the  State.  The  quotient  of  the  enum- 
erator divided  by  the  denominator  is  a  decimal  which  indi- 
cates the  proportion  of  the  whole  net  income  which  should 
be  apportioned  in  Wisconsin,  i.  e.,  such  proportion  of  total 
income  as  gross  business  within  the  State  and  value  of  prop- 
erty within  the  State  is  to  local  gross  business  anywhere  and 
total  property  owned. 


* 


192  STATE  OF  NEW  YORK 

II.  ADMINISTRATION 

The  distinguishing  feature  of  the  Wisconsin  Income  Tax  Law 
is  the  prominence  given  to  the  scheme  of  administration.  Of  the 
seventeen  closely  printed  pages  which  contain  the  law  in  pamphlet 
form,  about  two-thirds  are  devoted  to  the  methods  by  which  law  is 
to  be  administered.  It  was  realized  that  the  failure  of  all  State 
income  taxes  in  the  past  was  directly  attributable  to  lax  methods 
on  the  part  of  the  local  officials,  and  this  danger  was  sought  to  be 
avoided  by  securing  a  higher  degree  of  centralization.  To  this 
end  the  administration  of  the  law  was  placed  wholly  in  the  hands 
of  the  permanent  State  Tax  Commission. 

For  purposes  of  ascertaining  the  amount  of  income  to  be 
assessed,  the  taxpayers  are  divided  into  the  following  classes : 

(a)  Individuals; 

(b)  Guardians,  trustees,  executors,  agents  and  receivers; 

(c)  Firms  and  partnerships; 

(d)  Corporations; 

(e)  Farmers  and  dairymen; 

(f )  Wage-earners,  salaried  men  and  other  individuals  deriving 
their  income  from  personal  services. 

Returns 

Individuals.  All  returns  of  income  by  firms  and  individuals  are 
made  to  the  income  tax  assessors. 

Upon  receipt  of  these  returns,  they  are  carefully  edited,  and 
the  assessors  make  an  assessment  of  the  tax  in  each  case.  If  the 
assessor  has  reason  to  believe  that  the  return  is  erroneous,  he  .can 
increase  the  amount  upon  which  the  tax  is  based,  upon  giving 
written  notice  to  the  taxpayer. 

A  board  of  review  of  three  persons  is  appointed  by  the  Tax 
Commission  of  each  district.  An  appeal  lies  from  the  decision 
of  the  assessor  to  the  board  of  review,  and  then  from  the  board  of 
review  to  the  Tax  Commission. 

Use  of  Information  at  Source  in  Wisconsin 

When  the  forms  for  income  tax  returns  are  given  out,  they  are 
accompanied  by  blanks  upon  which  the  taxpayer  is  required  to 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  193 

fill  out  the  name  and  address  of  every  person  to  \\  horn  a  salary  or 
wages  to  the  amount  of  $700  or  more  has  been  paid  during  the 
year  and  the  amount  paid  in  each  case. 

There  is  an  additional  blank  for  corporations  upon  which  the 
names  and  addresses  of  all  stockholders  to  whom  dividends  have 
been  paid,  together  with  the  amount  paid  or  given,  are  shown. 

In  like  manner,  claims  for  interest  paid  on  indebtedness  must 
be  accompanied  by  a  statement  of  the  name  and  address  of  the 
person  to  whom  such  interest  was  paid. 

The  information  thus  obtained  by  the  Tax  Commission  is  classi- 
fied and  arranged  so  as  to  be  furnished  to  the  assessors  of  the 
respective  districts  where  the  recipients  of  the  wages  or  dividends 
reside. 

Threefold  Check 

1.  The  above  data  shows  whether  any  excessive  salaries  are 
being  paid  to  officers  of  the  corporation. 

2.  It  enables  the  Commission  to  test  the  correctness  of  the 
corporate  deductions  for  wages,  salaries  and^  dividends  paid. 

3.  It  calls  attention  to  any  omission  on  the  part  of  individuals 
to  report  the  full  amount  received  by  them  as  interest,  wages  or 
dividends. 

Centralized  Control  and  Income  Tax  Assessors 
The  Income  Tax  Assessors.  The  success  of  the  income  tax 
as  applied  to  individuals  is  ascribed  principally  to  the  work  of  the 
assessors  of  incomes.  These  assessors  are  selected  through  the 
Civil  Service  Commission  without  reference  to  political  considera- 
tions, and  are  relieved  of  that  local  pressure  which  in  so  many 
places  has  brought  about  the  failure  of  the  general  property  tax. 

Cost  of  Administration 

The  cost  of  administering  the  Wisconsin  income  tax  is  very 
small,  indeed.  The  first  year  it  cost  1.31  per  cent,  and  the  second 
year  only  1.11  per  cent.  Comparing  these  figures  with  the  cost 
of  collecting  other  forms  of  taxes  in  this  country,  or  in  other 
countries,  discloses  the  fact  that  the  income  tax  is  one  of  the  least 
expensive  direct  taxes  collected  anywhere  in  the  world.  The  only 
possible  exception  to  this  statement  may  be  found  in  the  case  of 
7 


194  STATE  OF  NEW  YORK 

license  fees  and  similar  taxes  taken  directly  over  the  counter  of 
the  public  treasury  without  any  difficult  assessment  work  to  be 
performed.  The  latter  are,  of  course,  the  least  expensive  forms 
of  revenue  known  to  modern  governments.  The  cheapest  kinds  of 
taxes  collected  in  the  United  States  are  internal  revenue  taxes  of 
the  Federal  government.  However,  it  cost  the  state  of  Wisconsin 
less  proportionately  to  collect  the  income  tax  than  it  cost  the 
Federal  government  to  collect  the  internal  revenue  taxes. 

Delinquency 

The  experience  of  Wisconsin  for  the  first  three  years  indicates 
that  from  2  to  4  per  cent  of  the  income  taxes  are  delinquent.  Of 
the  total  amount  of  delinquency,  it  is  estimated,  in  the  opinion 
of  the  assessors  of  incomes,  that  about  50  per  cent  could  be 
collected,  that  about  25  per  cent  are  noncollectible,  and  the  re- 
maining 25  per  cent  doubtful.  In  other  words,  with  efficient 
and  vigorous  collection  on  the  part  of  the  local  treasurers,  only 
about  one  and  one-third  per  cent  should  be  finally  lost. 

Success  of  the  Tax 

The  Wisconsin  income  tax  is  generally  regarded  as  being  highly 
successful,  and  in  our  judgment  tha.t  opinion  is  well  justified  by 
the  results.  The  report  of  the  Wisconsin  Tax  Commission  for  the 
year  1914  has  this  to  say: 

"  .Such  were  the  ideals  and  objects  of  the  income  tax. 
Whether  it  would  accomplish  the  desired  results  was  dis- 
tinctly problematical.  Income  taxes  had  been  employed  in 
this  country  continuously  from  the  seventeenth  century.  But 
they  had  not,  particularly  in  recent  years,  worked  well.  In 
theory  the  income  tax  was  generally  admitted  to  be  the  ideal 
substitute  for  the  tax  on  moneys,  credits  and  perhaps  all  forms 
of  personal  property.  But  experts  doubted  whether  it  could 
be  made  to  work  as  a  state  tax,  and  in  particular  they  doubted 
whether  it  would  yield  reasonable  large  revenues,  whether  it 
would  not  prove  exceedingly  expensive  to  administer,  and 
whether  the  average  taxpayer  would  co-operate  with  the 
authorities  in  returning  sufficiently  accurate  and  truthful  re- 
ports upon  which  to  base  a  fair  and  adequate  assessment. 
Three  assessments  have  now  been  made  under  the  income  tax 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  195 

law  and  a  body  of  experience  and  data  has  been  accumulated 
sufficient  to  answer  with  some  certainty  the  doubts  and  ques- 
tions properly  raised  by  the  experiment  with  the  incomei  tax." 

It  then  goes  on  to  say  what  results  have  been  accomplished, 
which  may  be  summarized,  as  follows : 

(1)  The  income  tax  has  yielded  a  very  substantial  revenue, 
and  one  well  in  excess  of  that  received  from  the  personal  prop- 
erty tax.     Thus,  in  1912  the  tax  amounted  to  $3,482,145;  in 
1913,  $4,084,497;  and  in  1914  to  $4,140,571.     It  is  to  be  noted, 
however,  that  this  does  not  represent  actual  cash  collections,  be- 
cause under  the  Wisconsin  law  the  man  paying  a  personal  prop- 
erty tax  may  offset  it  as  against  his  income  tax. 

(2)  It  has  succeeded  in  reaching  large  classes  of  property  and 
groups   of   individuals  that  were   escaping  under  the   personal 
property  tax. 

(3)  It  has  reached  those  groups  in  proportion  to  their  ability 
to  pay. 

(4)  It  has  proved  from  an  administrative  standpoint  one  of 
the  cheapest  taxes  known,  costing  both  in  the  years  1913  and 
1914  less  than  a  hundred  thousand  dollars.     It  should  be  noted, 
however,  in  this  connection,  that  in  this  amount  there  is  included 
$34,000,  representing  the  cost  of  the  supervisors  of  assessment, 
leaving  $45,197.59  as  the  net  cost  of  the  income  tax  for  the  year 
1913-1914.     On  this  basis,  therefore,  the  income  tax  cost  to  assess 
and  administer  the  first  year  1.31  per  cent,  and  the  second  year 
1.11  per  cent. 

Advantages  of  the  Income  Tax 

The  income  tax  reaches  everyone  in  accordance  with  his  ability 
to  pay.  It  is  the  one  tax  that  will  most  fairly'  and  equitably 
reach  the  professional  and  salaried  men  who  earn  large  incomes. 
They  now  entirely  escape  taxation  except  on  such  property,  as  they 
may  have  accumulated  and  which  very  obviously  is  no  fair  indi- 
cation of  their  ability  to  contribute  to  the  support  of  government. 

This  is  likewise  true  in  respect  to  the  great  wealth,  represented 
by  the  securities  and  credits  of  all  kinds  and  by  the  various  forms 
of  intangible  property,  which  is  now  escaping  taxation.  One  of 
the  most  interesting  facts  to  be  gained  from  a  study  of  the  Wis- 
consin results  is,  that  the  classes  of  occupations,  of  professions 


* 


196  STATE  OF  NEW  YORK 

and  of  property-owners  that  most  successfully  escape  in  ISTew 
York,  are  the  very  ones  that  pay  the  larger  part  of  the  Wisconsin 
tax  levied  upon  firms  and  individuals.  In  ISTew  York  State  the 
following  classes  are  able  to  escape  taxation  in  a  large  degree: 
Bankers  and  capitalists,  brokers,  lawyers,  merchants  and  jobbers, 
manufacturers,  physicians  and  surgeons,  and  other  professions. 

We  quote  in  this  connection  from  the  Report  of  1914,  which 
reads  as.  follows : 


Occupation 


Bankers  and  capitalists  

982 

$116.33 

8.00 

1.61 

4.76 

Estates,  guardianships,  etc  

977 

82.42 

5.98 

1.60 

3.76 

Lumbermen  

346 

81.27 

1.97 

.57 

1.32 

Manufacturers  

2,  920 

78.26 

16.01 

4.80 

11.36 

Lawyers  

1,202 

59.26 

5.02 

1.97 

4.18 

Miners  

80 

38.89 

0.22 

.13 

.18 

Eetired  

3,  263 

37.24 

8.51 

5.36 

6.93 

Merchants  and  jobbers  

11,  838 

24.13 

20.01 

19.45 

23.55 

Physicians  and   surgeons  

1,642 

22.78 

2.62 

2.70 

3.30 

Brokers,  real  estate  men,  etc  .... 

5,338 

20.86 

7.80 

8.77 

8.72 

Public  officials  

555 

16.05 

0.62 

.91 

.93 

Mechanics  and  tradesmen  

5,768 

12.63 

5.10 

9.48 

6.17 

Professions  —  miscellaneous    .... 

2,  359 

12.30 

2.03 

3.88 

2.96 

Professors  and  teachers  

2,372 

10.40 

1.73 

3.90 

2.08 

State  and  public  employees  

1,203 

8.15 

0.69 

1.98 

.99 

Public  service  employees  

2,  870 

7.96 

1.60 

4.72 

2.07 

Farmers  

7,  225 

7.66 

3.87 

11.87 

6.40 

Bookkeepers,  stenographers,  etc. 

4,  148 

4.96 

1.44 

6.82 

2.54 

Laborers  

882 

2.91 

0.18 

1.45 

.34 

Other  occupations    

4,336 

20.25 

6.15 

7.12 

6.78 

Unknown  

554 

11.71 

0.45 

.91 

.68 

All   occupations    

60,  860 

23.46 

100.00 

100.00 

100.00 

"  Certain  important  conclusions  may,  however,  be  drawn 
with  safety.  For  instance,  the  census  statistics  make  it  plain 
that  there  are  not  less  than  165,000  farmers  in  the  state, 
from  which  it  follows  that  certainly  less  than  five  per  cent 
of  the  farmers  of  the  state  are  subject  to  the  income  tax. 
Similarly,  it  is  certain  that  considerably  less  than  one  per 
cent,  and  probably  less  than  one-half  of  one  per  cent,  of  the 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  197 

laborers  of  the  state  are  assessed  for  income  taxes.  Of  the 
bookkeepers,  stenographers  and  clerks,  the  statistics  indicate 
that  something  less  than  six  per  cent  were  assessed  for  in- 
come tax  in  1914. 

"  On  the  other  hand,  it  is  practically  certain  that  more 
than  fifty  per  cent  of  the  bankers  and  capitalists,  lawyers 
and  physicians  and  surgeons  were  subject  to  the  individual 
income  tax,  to  say  nothing  of  the  amounts  which  these  per- 
sons pay  indirectly  through  the  tax  on  corporations.  It  is 
interesting  also  to  note  that  probably  not  less  than  20  per 
cent  of  the  public  officials,  public  employees  and  public 
laborers  of  the  state  were  assessed  for  income  tax.  The 
federal  census  for  1910  shows  7,338  employees  in  the  public 
service,  not  elsewhere  classified,  including  guards,  watch- 
men, doorkeepers,  firemen  and  laborers.  Table  IV  shows 
that  1,758  public  officials  and  employees  were  assessed  for 
income  tax  in  1914,  or  somewhere  between  one-quarter  and 
one-fifth  of  the  number  recorded  in  the  census.  There  can- 
not be  a  very  large  number  of  public  employees  classified 
elsewhere  than  in  this  group. 

"  Perhaps  as  good  a  measure  of  the  relative  burden  of 
the  tax  as  could  be  secured  is  found  in  the  figures  showing 
the  average  tax  per  taxpayer.  The  various  occupations  are 
arranged  in  the  order  of  the  size  of  this  average  tax  in  Table 
VI.  The  highest  per  capita  tax,  $116.33,  is  paid  by  bank- 
ers and  capitalists;  the  lowest  by  laborers,  $2.91.  The  tax 
was  evidently  highest  upon  investors  and  allied  classes,  those 
drawing  their  incomes  largely  in  the  form  of  interest.  Next 
it  touches  the  extractive  and  manufacturing  industries  — 
lumbering,  manufacturing  and  mining  —  though  it  should 
be  remembered  that  in  these  classes  a  relatively  large  pro- 
portion of  the  tax  is  offset  by  the  personal  property  tax. 
Merchants  and  jobbers  follow  closely,  among  whom  also  a 
large  part  of  the  tax  is  offset  by  personal  property  taxes,  and 
thereafter  come  the  professional  classes.  The  lawyers  it 
will  be  observed  are  above  the  other  professional  classes, 
standing  between  manufacturers  and  miners.  The  tax  on 
the  professional  classes  generally  is  additional  or  supple- 


198  STATE  OF  NEW  YORK 

mentary.  It  is  not  offset  by  the  personal  property  taxes 
and  no  equivalent  tax  was  collected  from  these  classes  be- 
fore the  income  tax  was  introduced.  The  statistics  indicate 
that  the  income  tax  is  performing  exactly  the  service  for 
which  it  was  introduced  —  drawing  a  larger  contribution 
from  the  investing  and  professional  classes  and  from  those 
elements  of  the  manufacturing  and  commercial  classes  which 
are  usually  prosperous  and  subject  to  higher  income  than 
personal  property  taxes." 

This  conclusion  is  further  emphasized  when  we  remember  that 
the  largest  accumulations  of  so-called  intangible  personal  prop- 
erty are  found  in  our  great  cities,  and  that  the  income  tax  is, 
strictly  speaking,  an  urban  tax.  In  Wisconsin,  the  first  year 
over  40  per  cent  of  the  entire  tax  was  charged  in  Milwaukee 
County  and  more  than  80  per  cent  in  the  17  counties  having  the 
larger  cities  of  the  state,  while  20  per  cent  was  charged  in  the 
remaining  54  counties  containing  about  50  per  cent  of  the  popu- 
lation. 

The  urban  character  of  the  tax  is  shown  in  another  way  by  the 
returns  from  Dane  county  in  which  the  capital  is  located.  In 
the  county  there  are  six  times  as  many  farmers  as  there  are  pub- 
lic employees,  "  yet  only  sixty-eight  farmers  in  Dane  County  as 
contrasted  with  six  .hundred  twenty-four  public  employees  and 
professors  will  pay  an  income  tax;  and  the  farmers  will  pay  an 
income  tax  of  $877.35,  while  the  public  officials,  professors  and 
teachers  will  pay  $7,224.44,  more  than  eight  times  as  much." 

"  The  income  tax  is  primarily  an  urban  tax.  Milwaukee 
county,  for  instance,  contains  only  8.56  per  cent  of  the 
population  of  the  state,  but  42.55  per  cent  of  the  total  in- 
come and  47.12  per  cent  of  the  total  income  tax  are  assessed 
in  that  County.  The  fifty-four  rural  counties,  on  the  other 
hand,  contain  nearly  fifty  per  cent  of  the  population  but  pay 
less  than  one-fifth  of  the  tax. 

"  The  marked  urban  character  of  the  tax  comes  out  in 
other  relationships.  For  instance,  the  total  income  tax  as- 
sessed in  1914  amounts  to  $1.77  per  capita.  But  the  per 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  199 


capita  tax  in  Milwaukee  City  is  $4.50,  and  in  the  rural  coun- 
ties only  53  cents.  Again,  the  average  rate  of  taxation  paid 
is  3.61  per  cent  in  Milwaukee  County,  but  only  1.95  per  cent 
in  the  rural  counties  of  the  state.  Finally,  in  Milwaukee 
County  4.69  per  cent  of  the  population  is  subject  to  the  tax 
on  firms  and  individuals,  while  in  the  rural  districts  only 
1.71  per  cent  of  the  population  was  assessed.  In  short,  a 
smaller  proportion  of  the  people  pay,  and  they  pay  lower 
average  rates  on  smaller  average  incomes,  in  the  country  than 
in  the  city." 

As  has  already  been  shown,  the  property  tax  falls  with  the 
greatest  weight  on  the  man  of  small  means,  on  ths  widow,  on 
trust  estates,  on  young  and  struggling  business  concerns,  and, 
generally  speaking,  on  those  least  able  to  bear  it.  Under  the 
income  tax  these  people  contribute  their  proportion,  but  their 
proportion  is  relatively  small  as  compared  with  that  of  the 
wealthy  and  prosperous,  who  enjoy  large  incomes  and  are,  there- 
fore, better,  and  with  much  less  sacrifice,  able  to  shoulder  the  tax 
burden,  and  yet  who  to-day  are  practically  free  from  taxation, 
except  in  so  far  as  they  own  real  estate. 

We  cite  again  the  Wisconsin  results  for  purposes  of  illustration : 
"  This  table  contains  some  very  significant  data.  Of  those 
assessed  in  1914  for  income  tax,  41,732  had  taxable  in- 
comes under  $1,000.  This  group  of  small  taxpayers  con- 
stituted 68  per  cent  of  the  total  number,  but  paid  less  than 
11  per  cent  of  the  total  tax.  The  average  tax  in  this  group 
is  3.74. 

"  On  the  other  hand,  315  taxpayers  having  incomes  of 
$15,000  or  more,  and  constituting  about  one-half  of  one  per 
cent  of  the  total  number  of  taxpayers,  were  assessed  for 
practically  forty  per  cent  of  the  aggregate  tax,  and  the  aver- 
age tax  on  each  person  in  this  group  is  $1,794.  This  group 
of  315  taxpayers  constitute  less  than  2/100  of  1  per  cent 
of  the  population  of  the  State.  The  two  upper  groups  of 
taxpayers  —  667  in  number  —  constitute  less  than  3/100 
of  1  per  cent  of  the  entire  population  but  contributes  nearly 
one-half  of  the  income  tax." 


200 


STATE  OF  NEW  YOKK 


Classified  by 
amount  groups 
of  income 

Num- 
ber 
assessed 

Per  cent 
of  each 
group 
to  total 

Taxable 

income 

Per  cent 
of  each 
group 
to  total 

Tax 

Per  cent 
of  each 
group 
to  total 

Average 
tax  per 
indi- 
vidual 

Total 

60,560 

100.00 

$73,969,905  25 

100.00 

$1,427,923  13 

100.00 

$23  46 

Under  1,000... 

41,732 

63.57 

15,545,782  60 

21.02 

156,202  53 

10.94 

3  74 

1,000  to  1,999. 

10,528 

17.30 

11,004,276  71 

18.93 

152,871  09 

10.71 

14  52 

2,  000  to  2,  999. 

3,855 

6.33 

9,210,837  07 

12.45 

110,348  59 

7.73 

28  62 

3,000  to  3,999. 

1,691 

2.78 

5,760,689  61 

7.79 

75,436  33 

5.28 

44  61 

4,000  to  4,999. 

908 

1.49 

4,027,847  43 

5.44 

57,906  82 

4.05 

63  76 

5,000  to  9,999. 

1,479 

2.43 

9,820,371  30 

13.28 

182,901  61 

12.81 

123  70 

10,000  to  14,999 

352 

0.58 

4,245,486  58 

5.74 

127,168  00 

8.91 

361  26 

15,000  and  over. 

315 

0.52 

11,354,613  95 

15.35 

565,087  56 

39.57 

1,794  00 

As  a  further  illustration  we  may  give  an  example  of  the  amount 
that  would  be  contributed  by  the  highest  and  the  lowest  classes 
of  tax-payers  under  the  terms  of  the  bill  attached  to  this  report. 
72,345  people  having  incomes  less  than  $3,000  would  pay  a 
total  of  $287,587.15,  while  82  people  having  the  larger  incomes 
in  the  State  would  pay  a  total  of  $1,809,649.  The  result  is 
almost  startling,  and  yet  the  82  would  be  paying  only  their 
share.  But  neither  for  the  wealthy  man  nor  for  the  poor  man 
would  the  burden  be  a  heavy  one,  for  a  low  rate  running  from 
one-half  of  1  per  cent  to  a  maximum  of  2  per  cent  on  indi- 
viduals would  satisfy  all  our  needs.  Under  this  rate,  with  an 
exemption  of  $1,500  to  a  single  man  and  of  $2,000  to  the  average 
family,  the  family  man  with  an  income  of  $3,000  would  pay  but 
$5  per  annum,  while  the  man  with  an  income  of  $100,000  would 
pay  somewhat  less  than  $2,000  per  annum.  Could  either  one  of 
them  fairly  complain?  Nor,  under  such  circumstances,  would 
there  be  any  real  incentive  to  escape. 

No  man  will  willingly  pay  a  two  per  cent  tax  on  capital 
value,  which  amounts  to  taking  from  30  to  50  per  cent  of 
his  income.  Experience  has  shown,  however,  that  he  will 
pay  so  reasonable  an  amount  as  2  per  cent  on  income,  par- 
ticularly when  he  knows  that  all  who  should  are  contributing 
their  share.  Under  our  present  system  the  conscientious  tax- 
payer is  not  only  asked  to  pay  a  confiscatory  rate,  but  he  is 
asked  to  do  so  with  the  full  knowledge  that  nearly  everyone  in 
the  community  is  dodging  the  tax  in  one  way  or  another.  Most 
men  are  honest.  Most  men,  we  believe,  are  willing  to  pay  a  fair 
and  reasonable  tax,  but  there  is  a  point  in  taxation  where  it  is 
dangerous  to  test  human  nature  too  far,  and  where  the  honesty 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  201 

of  the  average  citizen  is  forced  to  give  way  to  the  instinct  of  self- 
protection. 

Turning  now  to  general  business  corporations  and  to  individ- 
uals and  partnerships  engaged  in  business,  we  find  that  in  so  far 
as  these  classes  are  concerned,  the  personal  property  tax  is  illogical, 
burdensome,  unequal  and  therefore  inequitable;  that  the  great 
majority  of  business  houses  escape  taxation,  but  that  those  that  do 
pay  are  taxed  at  a  rate  altogether  too  high,  a  fact  which  puts  them 
at  an  unfair  disadvantage  as  compared  with  their  competitors; 
that,  in  brief,  the  personal  property  tax  is,  in  the  main,  a  failure, 
and  to  the  extent  that  it  does  succeed,  grossly  unjust. '  We  find, 
moreover,  that  the  assessment  and  valuation  of  property  gives 
rise  to  all  manner  of  difficulties,  particularly  in  the  case  of  cor- 
porations where  it  is  necessary  to  include  the  franchise  value  as 
part  of  the  gross  assets  or  of  the  capital  stock  value ;  and  that  ulti- 
mately the  assessors  find  that  the  fairest  way  to  reach  the  capi- 
tal value  of  the  property  is  through  the  capitalization  of  net 
earnings.  Few,  if  any,  of  these  difficulties  arise  when  individuals 
engaged  in  business  and  general  business  corporations  are  taxed 
on  a  net-earning  basis.  As  has  been  well  said  by  Dr.  Ely  in  the 
report  of  the  Maryland  Tax  Commission : 

"  Furthermore,  it  is  of  moment  that  the  income  tax  does 
not  make  it  more  difficult  for  a  poor  man  to  begin  business 
or  to  continue  business.  Its  social  effects,  on  the  contrary, 
are  beneficial,  because  it  places  a  heavy  load  only  on  strong 
shoulders.  Even  for  men  of  large  means  engaged  in  busi- 
ness it  is  a  tax  to  be  strongly  recommended,  fur  such  men 
will  in  some  years  make  little  or  nothing,  or  even  lose  money. 
!N"ow,  our  property  tax  is  merciless;  it  exacts  as  much  in  a 
year  when  a  business  man  is  struggling  to  keep  his  head  above 
water  as  in  a  year  of  rare  prosperity;  whereas  the  income 
tax  exacts  much  only  when  much  can  be  given  without  finan- 
cial embarrassment.  If  it  were  practicable  to  substitute  an 
income  tax  for  the  whole  of  the  property  tax  it  would  save 
many  a  man  from  bankruptcy.  I  will  repeat,  with  some 


202  STATE  OF  NEW  YOKE 

modification,  in  this  connection,  words  I  used  in  my  special 
report  as  member  of  the  Baltimore  Tax  Commission: 

"  t  It  is  the  fairest  tax  ever  devised ;  it  places  a  heavy  bur- 
den when  and  where  there  is  strength  to  bear  it,  and  lightens 
the  load  in  case  of  temporary  or  permanent  weakness. 
Large  property  does  not  always  imply  ability  to  pay  taxes, 
as  taxes  should  come  from  income;  even  when  assessed  on 
property  it  is  only  an  indirect  device  for  estimating  income. 
An  income  tax  spares  the  business  man  in  season  of  distress 
and  helps  him  to  weather  the  storm,  but  asks  a  return  for 
the  consideration  shown  in  days  of  increasing  prosperity.7 ' 

Moreover,  as  we  have  repeatedly  stated  throughout  this  report, 
property  is  not  a  fair  test  of  ability  to  pay,  and  this  is  particu- 
larly true  in  the  case  of  merchants  and  manufacturers.  We  again 
desire  to  emphasize,  that  the  amount  of  stock  of  goods  on  hand  or 
the  capital  value  of  the  property  does  not  adequately  measure 
earning  capacity  for  the  purpose  of  taxation,  and  that  we  know  of 
no  fairer  way  of  determining  what  should  be  the  proper  contribu- 
tion of  an  individual  corporation  than  by  considering  its  net 
earnings.  This  is  all  the  more  true  when  we  consider  that  it 
takes,  in  some  instances,  several  years  for  a  business  to  develop  to 
the  point  that  it*  can  pay  a  return  upon  the  original  invest- 
ment. It  is  neither  good  policy  nor  sound  finance  to  overtax 
an  infant  industry,  nor,  for  that  matter,  even  an  established 
industry,  in  bad  times.  Taxes  are  paid  out  of  income,  and  one 
of  the  great  advantages  of  an  income  tax  as  a  business  tax  is  that 
it  levies  tribute  only  when  there  is  an  income  from  which  to  pay 
it.  That  the  income  tax  is  the  best  way  of  taxing  both  individ- 
uals engaged  in  business  and  general  business  corporations,  was 
the  opinion  of  practically  every  business  man  that  appeared 
before  our  Committee,  and  of  the  Tax  Committees  of  such  repre- 
sentative commercial  bodies  as  the  Chamber  of  Commerce  of  the 
City  of  Kochester,  of  the  Merchants  Association  of  the  City  of 
"New  York,  and  the  Chamber  of  Commerce  of  the  City  of  New 
York. 

The  income  tax  is  the  only  tax  that  will  reach  that  great  class 
of  people  who  do  business  in  New  York  City,  enjoying  all  of  its 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  203 

commercial  and  other  advantages  on  the  same  basis  as  a  citizen 
of  the  State,  and  who,  under  the  present  law,  pay  no  taxes  whatso- 
ever. 

One  of  the  chief  difficulties  of  our  present  system  is  the  vary- 
ing rates  in  different  localities  which  tend  to  produce  grave 
inequalities  as  between  towns  and  between  the  residents  of  differ- 
ent towns.  The  tendency,  of  course,  is  for  taxpayers  to  establish 
a  real  or  fictitious  residence  in  that  locality  where  the  rate  is 
lowest,  and  this  inevitably  results  in  injustice  to  the  other  less 
fortunate  towns  and  their  taxpayers.  By  the  establishment  of  a 
uniform  rate  throughout  the  State,  the  income  tax  will  do  away 
with  this  situation  entirely.  "  Isles  of  safety  "  and  favorite  places 
of  residence  will  disappear,  and  individuals  and  corporations  will 
all  meet  on  an  equal  and  fair  basis,  subject  to  a  just  burden,  and 
with  the  full  knowledge  that  it  is  common  to  all  and  that  there 
are  neither  a  fortunate  many  nor  an  unfortunate  few. 

To  equalize  the  burden  is  the  principal  function  for  which 
this  Committee  was  appointed.  Certain  classes  of  property  are 
to-day  paying  too  much,  others  too  little.  No  equality  can  exist 
until  those  paying  too  little  are  compelled  to  pay  their  share. 
It  seems  to  us  that  the  income  tax  meets  these  requirements. 

The  Committee  has  caused  to  be  made  various  estimates  as  to 
the  possible  yield  of  an  income  tax  in  the  State  of  New  York. 
Different  methods  have  been  used,  and  a  number  of  experts  have 
made  various  estimates  based  on  these  different  methods.  The 
results  in  each  case  are  not  far  apart.  All  tend  to  indicate  that  a 
corporation  tax  as  outlined  in  the  attached  bill  would  yield  in 
1916,  at  a  one  per  cent  rate,  approximately,  $9,000,000 ;  at  two  per 
cent,  approximately,  $18,000,000;  and  at  three  per  cent,  approxi- 
mately $27,000,000.  In  the  year  1917,  at  one  per  cent,  approxi- 
mately, $9,000,000;  at  two  per  cent,  approximately,  $19,000,000; 
and  at  three  per  cent,  approximately,  $29,000,000. 

The  estimate  of  the  yield  from  the  individual  income  tax  at  the 
rates  contained  in  the  attached  bill  is  as  follows: 

1916 $18,000,000,  approximately 

1917 19,000,000,  approximately 


204  STATE  OF  NEW  YORK 

From  these  amounts  would  have  to  be  deducted,  however,  the 
present  revenue  derived  under  section  182  from  the  corporations 
that  would  be  subject  to  the  income  tax,  which  corporations,  by 
the  terms  of  the  attached  bill,  would  be  relieved  from  payments 
under  section  182.  The  State  would  then,  out  of  the  total  amount 
collected,  retain  a  little  over  $2,000,000,  plus  the  cost  of  ad- 
ministration; and  the  balance,  under  the  terms  of  the  bill, 
would  be  returned  to  the  localities.  This  balance,  in  1917, 
would  amount  to  over  $44,000,000.  In  considering  the  net 
gain  to  the  localities  over  the  present  system,  we  would  have 
to  take  into  consideration  the  loss  of  approximately  $6,000,- 
000,  at  present  derived  from  the  personal  property  tax.  After 
allowing  for  all  these  deductions  there  would  still  be  a  net  gain 
of  $38,000,000,  to  be  distributed  to  the  localities  with  a  view  to 
equalizing  the  present  burden  of  taxation  by  relieving  real  estate 
and  such  other  forms  of  wealth  as  are  now  contributing  more  than 
their  share.  We  give  in  the  appendix  a  table  showing  the  amount 
which  would  be  received  by  each  county  if  the  $38,000,000  were 
distributed  on  the  basis  of  the  assessed  values  of  real  estate  for  the 
year  1914.  This  table  shows  beyond  any  question  that  there  is 
not  a  county  in  the  State  that  would  not  be  infinitely  better  off 
than  it  is  to-day. 

The  suggested  method  of   distribution   according  to   assessed 
values  in  each  county  is  novel,  but  it  has  these  advantages: 

1.  It  will  avoid  the  difficulty  which  would  arise  if  each  locality 
were  permitted  to  retain  the  tax  paid  by  residents  of  that  district. 
Under  this  latter  method  some  districts,  where  many  rich  men 
have  established  a  residence,  or  where  many  prosperous  corpora- 
tions are  located,  would  have  more  revenue  than  they  could  use, 
while  others,   whose  inhabitants  enjoy  smaller  incomes,   would 
receive  little  or  no  revenue. 

2.  The  new  method  will  tend  to  encourage  the  raising  of  real 
estate  assessments  to  a  point  approaching  true  value. 

3.  It  will  meet  the  criticism  made  of  an  income  tax  to  the  effect 
that,  although  the  rate  is  usually  low  at  the  start,  there  is  a  con- 
stant temptation  to  raise  it  in  order  to  obtain  more  revenue. 
Under  the  proposed  system  there  will  be  no  temptation  on  the 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  205 

part  of  the  Legislature  to  raise  the  rate,  inasmuch  as  the  State 
will  not  profit,  while  it  is  hardly  probable  that  all  of  the  localities, 
or  even  a  majority  of  them,  will  unite  at  one  time  in  demanding 
an  increase,  or  at  least  such  a  situation  will  not  occur  unless  the 
increase  is  fully  warranted  by  the  general  circumstances. 

It  is  sometimes  said  that  the  income  tax  is  inquisitorial,  but  it 
will  be  noted  that  the  bill  hereto  attached  makes  it  possible  for  the 
taxpayer  to  file  with  the  State  authorities  a  return  which  is,  for 
all  practical  purposes,  a  duplicate  of  the  information  already  fur- 
nished to  the  Federal  government,  together  with  such  additional 
information  as  may  be  necessary  for  State  purposes.  We  hear 
little  or  no  complaint  to-day  as  to  the  inquisitorial  features  of  the 
Federal  income  tax.  People  have  become  accustomed  to  it.  Nor 
do  we  feel  that  there  will  be  any  great  reluctance  to  disclose  to 
the  State  authorities  information  already  furnished  by  the  Federal 
government,  particularly  under  a  law  which  provides  severe  pen- 
alties for  the  disclosure  of  any  information  by  the  public  officers. 

Again  others  object  to  a  state  income  tax  on  the  ground  that 
there  is  already  a  Federal  income  tax.  But  let  us  analyze  the  ob- 
jection. There  is  no  question  that,  in  addition  to  the  Federal 
income  tax,  personal  property  must  contribute  its  quota  to  the  sup- 
port of  the  State  government.  Is  it  better  to  impose  a  2  per  cent 
property  tax  on  capital  value,  or  to  impose  a  2  per  cent  tax  on  net 
income?  We  can  hardly  assume  that  the  State  will  continue  to 
allow  the  personal  property  tax  to  remain  on  the  statute  books  and 
to  permit  its  evasion.  And  so  the  choice  does  not  lie  between  no 
tax  and  some  new  form  of  taxation  such  as  the  income  tax,  but  be- 
tween a  continuance  of  the  present  hopeless  system,  and  some 
better  and  more  equitable  way  of  raising  revenue.  If  such  a 
latter  plan  can  be  devised,  are  we  to  reject  it  because  it  is  already 
employed  by  the  Federal  government,  and  in  order  to  avoid  dupli- 
cation, continue  to  tax  the  same  property  in  a  manner  which  we 
admit  ourselves  to  be  inequitable,  and  to  be  a  failure  ? 

Finally,  it  is  often  said,  that  while  theoretically  sound,  the  in- 
come tax  will  not  work  in  practice.  This  may  have  been  true 
prior  to  the  enactment  of  the  Federal  Income  Tax  Law,  but  this 
law  is  of  immense  help  to  any  state  desiring  to  impose  an  inctrae 


206  STATE  OF  NEW  YOKK 

tax;  and  for  two  reasons.  In  the  first  place,  many  people  are 
already  accustomed  to  it,  they  understand  its  workings  and  will 
not  resist  its  enforcement;  and  in  the  second  place,  the  fact  that 
the  Federal  government  requires  a  return,  and  has  the  machinery 
to  check  up  that  return  in  a  strictly  accurate  manner,  makes  the 
evasion  of  the  State  income  tax  a  matter  of  no  little  difficulty  and 
danger.  In  so  far  as  corporations  are  concerned,  the  Federal  law 
to-day  permits  a  state  to  examine  the  returns.  A  similar  provi- 
sion in  so  far  as  individuals  are  concerned,  could  probably  be  ob- 
tained from  the  Federal  government.  But  in  the  meanwhile  it 
seems  to  us  highly  doubtful  whether  any  individual  having  already 
filed  a  correct  statement  with  the  Federal  government  would  be 
foolhardy  enought  to  file  an  incorrect  duplicate  with  the  State 
authorities. 

The  income  tax  will  work  in  practice.  It  has  been  successfully 
administered  in  practically  every  European  country  for  a  great 
number  of  years.  The  Federal  income  tax  works,  and  the  Wis- 
consin experiment  has  conclusively  demonstrated  that  with  a  good 
administration  a  state  income  tax  does  work.  There  seems  to  be, 
moreover,  a  strong  movement  in  favor  of  such  a  tax  throughout 
the  country.  Connecticut  and  West  Virginia  both  adopted  an  in- 
come tax  in  so  far  as  corporations  are  concerned  last  winter,  while 
the  people  of  Massachusetts,  by  a  vote  of  almost  three  to  one, 
adopted  at  the  last  election  an  amendment  which  permits  the  im- 
position of  such  a  tax  in  the  State  of  Massachusetts.  Practically 
every  witness  that  appeared  before  our  Committee  —  and  the  list 
included  representatives  of  leading  commercial  and  business  or- 
ganizations, as  well  as  tax  experts,  business  men  and  individuals 
from  many  walks  of  life  —  advocated  the  abolition  of  the  per- 
sonal property  tax  and  the  substitution  therefor  of  the  income 
tax. 

CONCLUSION 

The  Legislature  submitted  to  this  Committee  the  question: 
"  How  can  the  State  most  equitably  and  effectually  reach  all 
property  which  should  be  subjected  to  taxation  and  avoid  conflict 
and  duplication  of  taxation  on  the  same  property  ?  " 

Without  passing  upon  the  broad  questions  of  public  policy  in- 
volved in  the  adoption  of  a  new  tax  system,  which  questions 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  207 

should  more  properly  be  decided  by  the  Legislature  as  a  whole, 
this  Committee,  in  answer  to  the  specific  question  submitted  to  it, 
desires  to  state  that  all  the  evidence  presented  and  all  our  investi- 
gations, the  results  of  which  are  presented  in  full  in  this  report, 
tend  to  show  that  the  end  sought  for  will  be  accomplished  best  by : 
(1)  the  abolition  of  the  present  tax  on  personal  property;  (2)  the 
withdrawal  of  general  business  corporations  from  the  provisions 
of  section  182  of  the  Tax  Law;  and  (3)  the  imposition  of  an  in- 
come tax  on  individuals  and  general  business  corporations,  in- 
cluding manufacturing  corporations. 

To  illustrate  the  general  outline  of  what  is  involved  in  the  sub- 
stitution of  income  taxation  for  the  personal  property  tax,  and  to 
furnish  a  concrete  basis  for  criticism  and  suggestion  on  the  part 
of  the  public  and  the  Legislature,  we  attach  to  this  report  an 
income  tax  bill.  There  is  some  difference  of  opinion  among  the 
members  of  the  Committee  as  to  the  details  of  this  measure  and 
the  advisability  of  some  of  its  provisions.  In  view  of  this  differ- 
ence, the  Committee  as  a  whole  submits  this  specific  bill  to  the 
Legislature  merely  for  the  purposes  of  illustration. 

We  emphasize  that  such  a  bill  does  not  contemplate  the  imposi- 
tion of  an  additional  tax  but  a  substitute  for  a  hopelessly  bad 
system,  that  it  is  not  advanced  as  a  means  of  raising  additional 
revenue  for  State  purposes  but  rather  to  equalize  local  burdens. 
Again,  it  is  advanced  because  of  all  the  many  reforms  and  new 
methods  of  taxation  adopted  in  other  states  of  the  Union  and  in 
foreign  countries,  it  seems  to  promise  the  closest  approximation 
to  the  ideals  of  equity  and  equality.  It  does  this  by  taxing  each 
man  in  accordance  with  his  ability  to  contribute  to  the  support 
of  the  government  which  protects  him,  his  property  and  the 
social  structure  of  which  he  is  a  part. 

If  the  Legislature  intended  that  this  Committee  should  make 
a  complete  survey  of  our  tax  system,  the  work  is  by  no  means 
finished.  For  example,  the  study  of  the  taxation  of  public  service 
and  financial  corporations  could  not  even  be  begun  in  the  time  at 
our  disposal,  and  though  consideration  has  been  given  to  the  many 
amendments  to  the  Tax  Law  submitted  by  the  State  Tax  Commis- 
sion and  by  others7  we  find  it  impossible  to  report  definite  con- 
clusions as  to  them  at  this  date.  If  a  complete  study  of  the  tax 


208  STATE  OF  NEW  YORK 

laws  is  desired,  the  time  of  the  Committee  should  be  extended  to 
February  1,  1917. 

We  are  in  a  position,  however,  at  present,  to  make  one  or  two 
suggestions  in  addition  to  our  main  recommendations. 

The  inheritance  tax  as  it  stands  is,  generally  speaking,  of  satis- 
factory character.  It  is  regarded  as  a  fair  and  equitable  law, 
while  the  progressive  feature  is  almost  universally  acknowledged 
to  be  sound.  Nevertheless,  from  a  revenue  standpoint  the  tax  is 
a  disappointment.  The  Comptroller  informs  us  that  the  normal 
income  to  be  expected  therefrom  is  between  seven  and  nine  mil- 
lion dollars,  an  amount  well  below  what  had  been  anticipated. 
In  order  to  make  the  tax  more  productive,  the  Comptroller 
recommends  that  the  law  be  amended  in  the  following  particu- 
lars: 

(1)  The  present  inheritance  tax  law  as  amended  in  1911  ex- 
empts from  taxation  in  this  State  intangible  property  belonging 
to  nonresidents,  such  as  shares  in  New  York  corporations,  and 
money  and  securities  kept  on  deposit  here.  The  Comptroller 
would  restore  the  provisions  which  existed  prior  to  1911,  and  tax 
the  intangible  property  of  nonresidents.  The  Committee  does 
not  feel  that  it  can  agree  with  this  recommendation.  This  prop- 
erty has  a  situs  and  is  taxable  at  the  decedent's  residence.  As 
nearly  all  states  have  inheritance  tax  laws,  the  taxation  by  New 
York  is  double  taxation.  When  originally  adopted,  few  states 
had  inheritance  tax  laws,  and  the  question  was  not,  therefore, 
serious,  as  it  has  since  become.  Aside  from  the  unfairness  of  a 
double  tax  of  this  character,  we  do  not  believe  that  the  amend- 
ment would  result  in  a  greatly  increased  revenue,  but  rather  in 
driving  property  from  the  State  and  in  preventing  residents  of 
other  states  investing  in  New  York  corporations.  The  evil  results 
of  an  unwise  law  are  well  exemplified  by  experience  in  connection 
with  the  1910  amendments  to  the  inheritance  tax  law. 

"  The  law  of  1910  established  high  graded  rates  with  prac- 
tically no  exemption,  and  so  greatly  increased  the  tax  to  which 
such  investments  were  liable  that  it  attracted  attention  through- 
out the  United  States  and  Europe.  Investors  residing  outside  the 
State  were  warned  by  circulars  from  banking  houses  and  by  the 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  209 

newspapers  of  their  liability  to  taxation  under  the  New  York 
law,  of  which  many  of  them  had  been  unaware,  with  the  result 
that  millions  of  dollars  of  investments  and  deposits  were  with- 
drawn from  the  State,  and  more  withdrawals  were  in  contempla- 
tion. 

"Attention  was  called  to  this  situation  by  the  State  Comptroller 
in  his  report  of  1911.  The  Comptroller  said: 

"  '  Instances  have  lately  been  brought  to  my  attention  in  which 
foreign  capital,  seeking  investment  in  New  York  through  bank- 
ing houses,  which,  by  reason  of  their  connections,  would,  under 
normal  conditions,  have  invested  it  in  stocks  of  domestic  corpora- 
tions, has,  by  reason  of  the  hardship  of  this  law,  been  diverted 
from  the  natural  course  and  invested  in  the  stocks  of  corporations 
domiciled  in  other  states.  No  argument  is  needed  to  show  the 
effect  which  a  continuation  of  the  present  law  will  have  upon  the 
corporations  domiciled  here. 

"  '  The  great  custodial  institutions  incorporated  under  the  bank- 
ing law  of  the  State  to  care  for  the  property  of  its  citizens  are 
likewise  suffering  loss  of  patronage  due  to  the  severity  of  this 
law.'  " 

After  the  law  had  been  in  operation  eight  months  it  was  esti- 
mated that  the  withdrawal  of  securities  and  investments  in  this 
State  had  amounted  to  $400,000,000. 

(2)  The  Comptroller  further  suggested  that  a  tax  should  be 
collected  on  the  amounts  bequeathed  to  educational  and  charitable 
institutions  in  other  states  which  are  now  exempt.  The  wisdom 
of  such  an  amendment  is  open  to  the  gravest  doubts,  and  we  can- 
not recommend  its  adoption.  The  exemption  from  taxation  of 
religious,  charitable  and  educational  institutions  has  long  since 
been  recognized  as  a  permanent  policy  in  the  State  of  New  York. 
If  such  institutions  are  to  be  encouraged,  we  do  not  know  why 
this  principle  should  be  limited  to  our  own  State.  As  a  matter 
of  broad  public  policy,  New  York's  interest  in  the  development 
of  educational  and  charitable  enterprises  in  other  states  should  be 
second  only  to  her  interest  in  the  development  of  such  enterprises 
within  her  own  border.  Men  should  be  encouraged  to  make  be- 
quests to  institutions  devoted  to  the  public  good,  not  discouraged, 


210  STATE  OF  NEW  YORK 

no  matter  where  those  institutions  may  be  located.  Any  other 
point  of  view  is  narrow  and  provincial,  unbecoming  to  a  great 
State,  and  will  inevitably  lead  to  retaliation. 

(3)  The  third  amendment  contemplates  the  bringing  of  the 
various  groups  or  classifications  closer  together,  so  as  to  lower 
the  point  at  which  the  higher  rates  are  applicable.  The  rates 
remain  unchanged,  but  the  progression  is  made  somewhat  more 
rapid  and  sharper.  The  Comptroller  estimates  that  such  an 
amendment  will  add  $2,500,000  to  the  annual  yield  of  the  tax 
"  without  imposing  any  appreciable  hardship  upon  those  whose 
immediate  interests  in  property  would  be  affected  thereby."  We 
are  in  accord  with  this  suggestion,  which  appears  to  be  a  sound 
and  proper  one,  though  we  do  not  agree  to  all  the  details  of  the 
amendment  as  contained  in  his  report. 

Should  the  last  recommendation  be  adopted  and  the  State's 
revenue  increased  $2,500,000,  it  would  then  be  possible  to  give 
some  measure  of  relief  to  the  localities  pending  a  more  thorough 
reform,  through  the  division  between  the  State  and  the  locality 
of  the  increase  in  the  excise  tax,  should  that  increase  be  made 
permanent,  and  of  the  automobile  license  tax,  with  the  under- 
standing, however,  that  as  to  the  latter  both  the  State  and  the 
county  should  continue  to  devote  their  respective  shares  to  the 
maintenance  of  highways.  There  is  no  novelty  involved  in  such 
a  division.  It  is  in  line  with  the  policy  adopted  in  the  past  as 
exemplified  by  the  division  of  the  excise  taxes  and  of  the  mort- 
gage recording  tax. 

In  conclusion,  it  is  pertinent  to  call  attention  to  the  fact  that 
if  the  Federal  government  is  to  abandon  its  traditional  policy 
of  relying  upon  indirect  taxation,  and  is  to  look  more  and  more 
to  direct  taxes  for  its  support;  if  Federal  income  tax  rates  are 
to  be  raised  and  a  Federal  inheritance  tax  imposed,  it  will  be 
necessary  to  revolutionize  our  systems  of  State  taxation.  The 
Federal  government  is  much  better  able  to  effectively  impose 
indirect  taxes,  such  as  custom  duties,  excise,  etc.  These  have 
been  and  are  its  natural  sources  of  revenue;  while  the  states  are 
of  necessity  compelled  to  rely  for  the  most  part  on  direct  taxes. 
Time  and  space  do  not  permit  the  adequate  discussion  of  so  large 


JCINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  211 


a  topic.  We  cannot  refrain,  however,  from  pointing  out  the  utter 
folly  of  building  up  side  by  side  two  independent  and  totally  un- 
related systems  of  taxation,  without  conference,  mutual  under- 
standing or  an  intelligent  endeavor  to  determine  the  limits  of  the 
fields  of  taxation  to  be  assigned,  respectively,  to  the  Federal 
government  and  to  the  states. 

OGDEN  L.  MILLS,  Chairman, 
ARCHIE  D.  SANDERS, 
EDWARD  A.  EVERETT, 
H.  EDMUND  MACHOLD, 
WILLIAM  W.  CHACE. 

While  I  concur  in  the  majority  report  of  the  committee,  believ- 
ing that  all  the  testimony  taken  points  irresistibly  to  the  conclu- 
sions reached,  yet  I  most  strongly  disapprove  of  many  features 
of  the  Income  Tax  bill  attached  to  the  report,  the  details  of  which 
are  not  at  all  in  accord  with  my  views  of  such  a  measure. 

WILLIAM  W.  CHACE. 


DRAFT  OF  LAW  FOR  INCOME  TAX 


[213] 


* 


DRAFT  OF  LAW  FOR  INCOME  TAX 


AN  ACT 

To  amend  the  tax  law,  in  relation  to  imposing  an  income  tax. 

The  People  of  the  State  of  New  York,  represented  in  Senate 
and  Assembly,  do  enact  as  follows: 

Section  1.  Chapter  sixty-two  of  the  laws  of  nineteen  hundred 
and  nine,  entitled  "An  act  in  relation  to. taxation,  constituting 
chapter  sixty  of  the  consolidated  laws,"  is  hereby  amended  by 
adding  a  new  article  to  be  article  sixteen,  to  read  as  follows: 

AETICLE  16. 
TAX  UPON  AND  WITH  RESPECT  TO  INCOMES. 

Section  340.  Definitions. 

341.  Tax  upon  and  with  respect  to  incomes. 

342.  Definition  of  "  income." 

343.  "Net  income"  and  "taxable  income"  defined. 

344.  Deductions  to  persons  other  than  corporations. 

345.  Deductions  to  corporations. 

346.  Specific  personal  deduction. 

347.  Income  exempt. 

348.  Persons  not  subject  to  income  tax. 

349.  Income  within  and  without  the  state. 

350.  Rate  of  taxation. 

351.  Administration  and  assessment. 

352.  When  returns  to  be  made. 

353.  Consolidated  return  from  certain  corporations. 

354.  Powers  of  tax  commission;  revision  of  accounts. 

355.  Penalties. 

356.  Certification  of  assessment  to  comptroller. 

357.  Notice  of  assessment. 

358.  When  payable. 

359.  Warrant  for  the  collection  of  taxes. 

360.  Action  for  recovery  of  taxes;  forfeiture  of  char- 

ter by  delinquent  corporations. 
[215] 


216  STATE  OF  NEW  YOEK 

Section  361.  Distribution  of  the  tax. 

362.  The  tax  on  salaries  paid  to  non-residents  to  be  with- 

held by  employers. 

363.  Persons  acting  in  a  fiduciary  capacity. 

364.  Tax  commission  authorized  to  make  such  regula- 

tions and  to  collect  such  facts  as  are  necessary  to 
enforce  this  article. 

365.  :Secrecy  required  of  officials.     Penalty  for  violation. 

366.  Persons  subject  to  the  income  tax  exempt  from  the 

personal  property  tax  and  from  the  provisions  of 
sections  twelve,  one  hundred  and  eighty-two  and 
one  hundred  and  ninety-two  of  the  tax  law. 

§  340.  Definitions.  For  the  purpose  of  this  article  and  unless 
otherwise  required  by  the  context: 

1.  The   word    "  person "    or   the  word   "  taxpayer "    shall   be 
deemed  to  include  individuals,  firms,  copartnerships,  representa- 
tives and  corporations  as  hereinafter  defined. 

2.  The  word  "  corporation  "  shall  be  deemed  to  include  corpo- 
rations, joint  stock  companies,  associations  and  those  trusts  whose 
property  is  represented  by  transferable  certificates  or  by  capital 
stock  divided  into  transferable  shares.     For  the  purpose  of  this 
act  corporations  shall  be  deemed  to  reside  within  the  state  under 
whose  laws  they  were  organized  and  erected. 

§  341.  Tax  upon  and  with  respect  to  incomes.  A  tax  is  hereby 
imposed  upon  every  person  residing  within  the  state,  and  shall 
be  collected  and  paid  annually  upon  and  with  respect  to  his  entire 
net  income  from  all  sources  except  that  from  property  located  or 
from  any  business,  trade  or  profession  carried  on  without  the 
state  as  hereinafter  provided ;  and  a  like  tax  shall  be  collected  and 
paid  annually  upon  and  with  respect  to  the  entire  net  income  from 
all  property  located  and  of  every  business,  trade  or  profession 
carried  on  in  this  state  by  persons  residing  elsewhere.  Such  tax 
shall  first  be  collected  and  paid  in  the  year  nineteen  hundred  and 
seventeen  upon  and  with  respect  to  the  taxable  income  for  the  year 
ending  December  thirty-first,  nineteen  hundred  and  sixteen. 

§  342.  Definition  of  income.  1.  The  term  "  income  "  as  used 
in  this  act  shall  comprise  all  gains,  profits  and  income  derived 
from  any  source  whatever,  including  the  income  from  but  not  the 
value  of  property  acquired  by  gift,  bequest,  devise  or  descent. 
It  shall  include  but  shall  not  be  limited  to: 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  217 

a.  Salaries,  wages,  fees  and  compensation  for  personal  service 
of  whatever  kind  and  in  whatever  form  paid. 

b.  Interest,  dividends,  and  rent,  including  royalties  from  mines 
or  the  possession  or  use  of  franchises  or  legalized  privileges  of  any 
kind. 

c.  Gains,  profits  and  income  derived  from  securities,  or  from 
professions,   vocations,   businesses,   trade,   commerce  or  sales,   or 
from  transactions  growing  out  of  the  ownership  or  use  of  or  inter- 
est in  property. 

d.  So  much  of  any  debt  or  account  due  to  the  taxpayer  and  col- 
lected after  January  first,  nineteen  hundred  and  sixteen,  as  has 
been  written  off  as  worthless  at  any  time  prior  to  such  collection. 

2.  Income   shall  not   include  the  proceeds   of  life  insurance 
policies  paid  upon  the  death  of  the  person  insured;  nor  amounts 
paid  by  the  insured  on  a  life  insurance,  endowment,  or  annuity 
contract  when  returned  to  him  upon  the  maturity  or  surrender  of 
the  contract,  but  the  amount  by  which  the  sum  received  exceeds 
the  sum  paid  shall  be  included  as  income;  and  so  much  of  any 
annuity  as  is  composed  of  an  interest  return  upon  the  principal 
sum  paid  therefor,  shall  also  be  included  as  income. 

3.  Of  the  gain  derived  or  loss  sustained  from  the  sale  of  real 
estate,  stocks,  bonds,  securities  or  other  property  acquired  before 
January  first,  nineteen  hundred  and  sixteen,  not  regularly  bought 
and  sold  by  the  taxpayer,  only  such  proportion  shall  be  included 
as  the  time  between  January  first,  nineteen  hundred  and  sixteen, 
and  the  date  of  sale  bears  to  the  entire  time  between  the  date  of 
acquisition  and  the  date  of  sale. 

§  343.  "Net  income"  and  "taxable  income"  defined.  The 
term  "  net  income  "  shall  mean  the  excess  of  income  as  herein- 
before defined  over  and  above  the  deductions  and  exemptions  here- 
inafter authorized.  As  applied  to  persons  residing  within  the 
state,  the  term  "  taxable  income  "  shall  mean  all  net  income  ex- 
cept that  from  property  located,  or  from  any  business,  trade  or 
profession  carried  on,  without  the  state.  As  applied  to  persons 
residing  without  the  state,  the  term  "  taxable  income  "  shall  mean 
the  entire  net  income  from  all  property  located,  and  of  every  busi- 
ness, trade  or  profession  carried  on,  within  the  state. 

§  344.  Deductions  to  persons  other  than  corporations.  In  com- 
puting net  income  of  persons  other  than  corporations  there  shall 
be  allowed  as  deductions  from  the  income  as  above  defined : 

1.  The  necessary  expenses  actually  paid  in  carrying  on  any 
business,  not  including  personal,  living  or  family  expenses. 


218  STATE  OF  NEW  YORK 

2.  Interest  paid  within  the  year  except  as  provided  in  sub- 
division eight  of  this  section. 

3.  Taxes  paid  within  the  year  upon  or  with  respect  to  income 
subject  to  this  tax,  including  federal  income  taxes  thereon  when 
separately  stated  in  the  return,  and  including  also  license  taxes, 
privilege  taxes  and  other  taxes  upon  business  or  property  the 
income  from  which  is  subject  to  this  tax;  but  not  including  assess- 
ments for  local  improvements,  taxes  imposed  by  article  ten  of  the 
tax  law  or  other  inheritance  taxes  wherever  imposed. 

4.  The  following  losses  when  actually  sustained  during  the 
year  and  not  compensated  for  by  insurance  or  otherwise: 

(a)  Losses  resulting  from  fire,  storm  or  other  casualty,  and 
from  theft  or  property  used  in  connection  with  the  business  or 
profession  of  the  taxpayers. 

(b)  Losses  incurred  in  trade  or  transactions  entered  into  for 
profit,  to  the  extent  that  a  profit  therefrom,  if  realized,  would  have 
been  taxable. 

5.  Debts  due  to  the  taxpayer  arising  in  the  course  of  business, 
charged  off  within  the  year  and  not  theretofore  ascertained  to  be 
worthless. 

6.  A  reasonable  annual  allowance  for  the  exhaustion,  wear, 
tear  and  obsolescence  of  property  arising  out  of  its  use  or  employ- 
ment in  the  business,  and  based  upon  its  cost  in  cash  or  the 
equivalent  of  cash ;  but  no  deduction  shall  be  made  for  any  amount 
of  expense  of  restoring  property  or  making  good  the  exhaustion 
thereof  for  which  an  allowance  is  or  has  been  made;   and  no 
deduction  shall  be  allowed  for  any  amount  paid  out  for  new 
buildings,  permanent  improvements  or  betterments  made  to  in- 
crease the  value  of  any  property  or  estate. 

7.  Any  salary  received  by  a  non-resident,  the  tax  upon  which 
has  been  withheld  and  which  has  been  paid  or  is  to  be  paid  by 
an  employer  or  payor  under  the  provisions  of  section  three  hun- 
dred and  sixty-two  of  this  article;  and  any  income  received  by  a 
beneficiary  which  is  taxed  or  taxable  to  his  representative  under 
the  provision  of  section  three  hundred  and  sixty-three  of  this 
article. 

8.  No  deduction  shall  be  made  for  expenses  chargeable  to  resi- 
dence property  occupied  by  its  owner,  nor  for  the  depreciation 
thereof,  taxes  paid  thereon,  nor  for  interest  paid  upon  indebted-* 
ness  secured  thereby;  and  the  annual  value  or  estimated  rental 
thereof  shall  not  be  included  in  the  income  subject  to  taxation. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  219 


9.  Dividends  received  from  stock  in  any  corporation  and  profit 
received  from  an  interest  in  any  copartnership  subject  to  this  tax, 
provided  that  when  only  part  of  the  net  income  of  the  corporation 
or  copartnership  from  which  such  dividend  or  profit  was  paid 
shall  have  been  taxed  under  this  article,  only  a  corresponding  part 
of  such  dividend  or  profit  shall  be  deducted. 

§  345.  Deductions  to  corporations.  In  computing  the  net 
income  of  any  corporation  there  shall  be  allowed  as  deductions 
from  the  income  as  above  defined: 

1.  All  the  ordinary  and  necessary  expenses  paid  within  the  year 
in   the  maintenance   and   operation   of   its   business   and   prop- 
erties including  rentals  or  other  payments  required  to  be  made 
as  a  condition  to  the  continued  use  or  possession  of  property. 

2.  The  following  losses  when  actually  sustained   during  the 
year  and  not  compensated  for  by  insurance  or  otherwise: 

a.  Losses   resulting  from  fire,   storm  or  other  casualty,   and 
from  theft  of  property  used  in  connection  with  the  business  or 
profession  of  the  taxpayer. 

b.  Losses  incurred  in  trade  or  transmissions  entered  into  for 
profit,  to  the  extent  that  a  profit  therefrom,  if  realized,  would 
have  been  taxable, 

3.  Debts  due  to  the  taxpayer  arising  in  the  course  of  business 
charged  off  within  the  year  and  not  theretofore  ascertained  to  be 
worthless. 

4.  When  duly  entered  on  the  books  of  the  corporation,  a  rea- 
sonable  annual   allowance  for   exhaustion  and   depreciation  by 
use,  wear,  tear  and  obsolescence  of  property,  based  upon  its  cost 
in  cash  or  the  equivalent  of  cash ;  but  no  deduction  shall  be  made 
for  any  amount  of  expense  of  restoring  property  or  making  good 
the  exhaustion  thereof  for  which  an  allowance  is  or  has  been 
made;  and  no  deduction  shall  be  allowed  for  any  amount  paid 
out  for  new  buildings,  permanent  improvements  or  betterments 
made  to  increase  the  value  of  any  property  or  estate. 

5.  Interest  paid   within  the  year  on   its  indebtedness  to   an 
amount  of  such  indebtedness  not  exceeding  the  sum  of  its  paid 
up  capital  stock  and  one-half  of  its  interest  bearing  indebtedness 
as  both  stood  at  the  close  of  the  year,  or  if  no  capital  stock,  the 
amount  of  interest  paid  within  the  year  on  an  amount  of  its 
indebtedness  not  exceeding  the  sum  of  its  net  worth  and  one-half 
of  its  interest-bearing  indebtedness  as  both  stood  at  the  close  of 
the  year;  provided,  that  in  case  of  indebtedness  wholly  secured 
by  collateral  the  subject  of  sale  in  ordinary  business  of  such  cor- 


220  STATE  OF  NEW  YORK 

poratioB,  the  total  interest  secured  and  paid  by  such  corporation 
within  the  year  on  any  such  indebtedness  may  be  deducted  as  a 
part  of  its  expense  of  doing  business ;  and  provided  that  the  above 
limitation  upon  the  interest  deduction  shall  not  apply  to  so  much 
of  the  interest  paid  by  any  corporation  as  is  shown  to  be  taxable 
to  other  persons  under  the  provisions  of  this  act. 

6.  Taxes  paid  within  the  year  upon  or  with  respect  to  incomes 
bubject  to  this  tax,  including  federal  income  taxes  thereon  when 
separately  stated  in  the  return,  and  including  also  license,  privi- 
lege and  other  taxes  upon  business  or  property  the  income  from 
which  is  subject  to  this  tax;  but  not  including  assessments  for 
local  improvements,  taxes  imposed  by  article  ten  of  the  tax  law 
or  other  inheritance  taxes  wherever  imposed. 

7.  Dividends  received  from  stock  in  any  corporation  subject 
to  this  tax,  provided  that  when  only  part  of  the  income  of  the 
corporation  from  which  such  dividend  was  paid  shall  have  been 
taxed   under   this   article,    only   a   corresponding   part    of   such 
dividend  shall  be  deducted. 

8.  Any  income  received  by  a  beneficiary  which  is  taxed  or 
taxable  to  his  representative  under  the  provisions  of  section  three 
hundred  and  sixty-three  of  this  article. 

9.  Amounts  distributed  to  patrons  in  any  year,  in  proportion 
to  their  patronage  of  the  same  year,  by  any  corporation  doing 
business  on  a  co-operative  basis,  shall  be  returned  as  income  by 
said  patrons  but  may  be  deducted  by  such  corporation  as  cost,  pur- 
chase price  or  refund;  provided  that  no  such  deduction  shall  be 
made  for  amounts  distributed  to  the  stockholders  or  owners  of 
such  corporation  in  proportion  to  their  stock  or  ownership,  nor 
for  amounts  retained  by  such  corporation  and  subject  to  distribu- 
tion according  to  stock  or  ownership  as  distinguished  from  patron- 
age. 

§  346.  Specific  personal  deduction.  In  lieu  of  all  personal 
or  domestic  expenditures  and  losses,  persons  other  than  copartner- 
ships and  corporations  shall  be  allowed  the  following  specific  de- 
ductions from  net  income : 

1.  To  an  individual  fifteen  hundred  dollars. 

2.  To  husband  and  wife  living  together  eighteen  hundred  dol- 
lars. 

3.  For  each  child  under  the  age  of  eighteen  years  one  hundred 
dollars;  but  the  total  exemption  to  husband,  wife  and  children 
under  eighteen  years  of  age  residing  together  as  members  of  a 
familv  shall  in  no  case  exceed  two  thousand  dollars. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  221 


4.  In  computing  said  exemptions  and  amount  of  taxes  pay- 
able by  persons  residing  together  as  members  of  a  family,  the 
income  of  the  wife  and  the  income  of  each  child  under  eighteen 
years  shall  be  combined  with  that  of  the  husband  or  father,  or 
if  he  be  not  living,  with  that  of  the  head  of  the  family  and  taxed 
to  him.     The  tax  thereon  shall  be  payable  by  such  husband  or 
head  of  the  family,  but  if  not  paid  by  him  may  be  enforced 
against  any  person  whose  income  is  included  in  the  assessment. 
The  member  of  the  family  who  pays  the  tax  shall  have  a  legal 
right  of  reimbursement  against  each  other  member  of  the  family 
in  the  proportion  that  the  net  income  of  such  other  member  bears 
to  the  combined  net  income.     The  wife  may  elect  to  make  an 
independent  return  of  income,  in  which  case  she  shall  be  entitled 
to  an  exemption  of  nine  hundred  dollars,  and  the  husband  to  an 
exemption  of  nine  hundred  dollars  plus  an  allowance  of  one  hun- 
dred dollars  for  each  child  under  eighteen  years  of  age  who  lives 
with  him ;  but  the  total  exemption  to  husband,  wife,  and  children 
living  together  shall  in  no  case  exceed  two  thousand  dollars. 

5.  When  part  of  the  net  income  of  any  person  entitled  to  a 
specific  deduction  is  excluded  as  being  derived  from  sources  with- 
out the  state,  said  deduction  shall  be  proportionately  reduced. 

§  347.  Income  exempt.     The  following  income  shall  be  ex- 
empt from  taxation  under  this  act : 

1.  Pensions  received  from  the  United  States. 

2.  Compensation  received  for  injury  or  incapacity  under  any 
compensation  law  of  this  or  any  other  state,  or  of  the  United 
States, 

3.  Salaries,  wages  and  other  compensation  received  from  the 
United  States  by  officials  or  employees  thereof. 

4.  Interest  upon  the  obligations  of  the  United  States  or  of  its 
possessions,  and  upon  the  obligations  of  this  state  or  of  its  polit- 
ical subdivisions. 

5.  Income  received  by  the  United   States,  the  state,  or  any 
political  subdivision  thereof. 

6.  Income  of  any  corporation  or  association  organized  exclu- 
sively for  the  moral  or  mental  improvement  of  men  and  women 
or  for  religious,   Bible,  tract,   charitable,  benevolent,   fraternal, 
missionary,  hospital,  infirmary,   educational,   scientific,  literary, 
library,  patriotic,  historical  or  cemetery  purposes,  or  for  the  en- 
forcement of  laws  relating  to  children  or  animals,  or  for  two  or 
more  of  such  purposes,  if  such  income  be  used  exclusively  for 


222  STATE  OF  NEW  YORK 

carrying  out  one  or  more  of  suck  purposes.  But  no  such  cor- 
poration or  association  shall  be  entitled  to  any  such  exemption  if 
any  officer,  member  or  employee  thereof  shall  receive  or  may  be 
lawfully  entitled,  to  receive  any  pecuniary  profit  from  the  opera- 
tions thereof,  except  reasonable  compensation  for  services  in 
eifecting  one  or  more  of  such  purposes,  or  as  proper  beneficiaries 
of  its  strictly  charitable  purposes;  or  if  the  organization  thereof 
for  any  such  avowed  purposes  be  a  guise  or  pretence  for  directly 
or  indirectly  making  any  other  pecuniary  profit  for  such  corpora- 
tion or  association  or  for  any  of  its  members  or  employees,  or  if 
it  be  not  in  good  faith  organized  or  conducted  exclusively  for 
one  or  more  of  such  purposes. 

7.  Income  of  any  officer  of  a  religious  denomination  or  of 
trusts  received  for  any  of  the  purposes  mentioned  in  subdivision 
six  preceding,  subject  to  the  same  condition  and  exceptions  as 
control  the  exemptions  according  to  the  corporations  or  associa- 
tions included  in  subdivision  six  preceding,  but  nothing  herein 
shall  be  construed  to  exempt  the  fees,  stipends,  personal  earnings 
or  other  private  income  of  such  persons. 

8.  Income  of  labor,   agricultural  and  horticultural  organiza- 
tions, business  leagues,  chambers  of  commerce  or  boards  of  trade 
and  civic  leagues  or  organizations,  not  organized  or  conducted  for 
profit  and  no  part  of  the  net  income  of  which  inures  to  the  bene- 
fit of  the  private  stockholder  or  individual. 

9.  Interest  received  during  the  exemption  period  of  five  years 
specified  in  chapter  four  hundred  and  sixty-five  of  the  laws  of 
nineteen  hundred  and  fifteen,  from  secured  debts  which  have  been 
recorded  and  taxed  under  the  provisions  of  said  chapter. 

§  348.  Persons  not  liable  to  income  tax.  The  following  per- 
sons shall  not  be  liable  to  the  income  tax  herein  provided  for : 

1.  Building  and  loan  associations. 

2.  Banks  whose  stockholders  are  taxable  under  the  provisions 
of  section  thirteen  of  the  tax  law. 

3.  Persons  liable  to  the  taxes  imposed  by  sections  one  hundred 
and  eighty-four,  one  hundred  and  eighty-five,  one  hundred  and 
eighty-six,    one    hundred    and    eighty-seven,    one   hundred    and 
eighty-eight,  one  hundred  and  eighty-nine  and  one  hundred  and 
ninety-one  of  the  tax  law;  but  nothing  herein  shall  be  construed 
to  exempt  income  received  by  any  such  person  as  trustee  or  repre- 
sentative. 

§  349.  Income  within  and  without  the  state.  For  the  pur- 
pose of  determining  taxable  income,  income  and  deductions  shall 
be  divided  or  allocated  in  accordance  with  the  following  rules : 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  223 

1.  Income  from  and  deductions  allowable  with  respect  to  ren- 
tals, royalties  and  the  operation  of  any  farm,  mine  or  quarry  shall 
follows  the  situs  of  the  property  from  which  such  income  was  de- 
rived. 

2.  In  the  case  of  individuals  having  a  permanent  office,  or  a 
permanent  place  of  business  or  employment  at  which  their  trade, 
occupation,  or  profession  is  exercised,  salaries,  wages,  fees  and 
compensation  for  personal  service  shall  be  allocated  to  the  state  in 
which  such  office,  or  place  of  business  of  employment  is  located. 
In  the  case  of  traveling  salesmen  and  persons  practicing  itinerant 
trades  or  occupations  and  having  a  permanent  office  or  place  of 
business  or  employment  to  which  they  report  or  return,  such  in- 
come shall  be  allocated  to  the  state  in  which  such  office  or  place  of 
business  is  located.    In  the  case  of  other  individuals  such  income 
shall  follow  the  residence  of  the  taxpayer.     The  provisions  of  this 
subdivision  shall  not  apply  to  income  received  by  copartnerships 
and  corporations  for  personal  service  rendered  to  others  by  their 
officers  and  employees. 

3.  Income  from  and  deductions  allowable  with  respect  to  stocks 
and   securities,   and   profit  or  loss   from   ownership  thereof  or 
dealings  therein,  shall  in  the  case  of  copartnerships  be  allocated 
to  that  place  of  business  of  the  taxpayer  at  or  from  which  his 
financial  concerns  and  operations  are  transacted  or  directed.    In- 
come from  any  deductions  allowable  with  respect  to  securities  and 
profit  or  loss  from  ownership  thereof,  or  dealings  therein,  shall 
in  the  case  of  corporations  be  allocated  to  that  place  of  business 
of  the  taxpayer  at  or  from  which  its  financial  concerns  and  opera- 
tions are  transacted  or  directed.     Income  from  and  deductions 
allowable  with  respect  to  stocks  and  profit  or  loss  from  ownership 
thereof,  or  dealings  therein,  shall  in  the  case  of  corporations  be 
allocated  to  the  place  where  the  physical  property  represented  by 
such  stock  is  located.     In  the  case  of  other  persons  such  income 
shall  follow  the  residence  of  the  taxpayer.    The  word  "  securities  " 
as  used  herein  shall  be  deemed  to  include  bonds,  debentures,  notes, 
certificates  or  other  evidences  of  indebtedness  or  obligation  for 
the  payment  of  money  or  its  equivalent,  which  obligation  by  its 
terms  is  payable  one  year  or  more  from  its  date. 

4.  Other  income  and  deductions  shall  be  allocated  to  the  state 
'  where  the  property  is  located  or  the  business  transacted,  from 

which  such  income  was  derived.  The  tax  commission  shall  pre- 
scribe for  different  classes  of  taxpayers  appropriate  regulations! 
for  enforcing  this  rule.  Until  such  regulations  are  issued  and 


224  STATE  OF  NEW  YORK 

in  the  case  of  any  industry  or  class  of  taxpayers  for  which  it  may 
be  impracticable  to  allocate  or  localize  income  and  the  corre- 
sponding deductions  the  following  process  of  apportionment  shall 
be  applied: 

There  shall  first  be  excluded  from  the  computation  the  income; 
and  deductions  governed  by  the  preceding  subdivisions  of  th'.a 
section  and  the  property  or  assets  from  which  such  income  was 
derived.  Of  the  remaining  net  income  such  a  portion  shall  be 
taxed  as  the  remaining  gross  assets  employed  in  any  business 
within  the  state  bear  to  the  remaining  gross  assets  wherever  em- 
ployed in  business. 

5.  Whenever  by  reason  of  loss  or  otherwise  the  entire  net  in- 
come for  the  year  is  less  than  the  taxable  income  only  the  smaller 
amount  shall  be  taxed. 

§  350.  Rate  of  taxation.  Corporations  shall  pay  annually  a 
tax  of  three  per  centum  upon  and  with  respect  to  the  entire  tax- 
able income.  Persons  other  than  corporations  shall  pay  annually 
upon  and  with  respect  to  the  entire  taxable  income,  the  amounts 
set  forth  in  the  following  schedule : 
When  the  taxable  income  exceeds  The  annual  tax  shall  be 

$0  but  does  not  exceed        $200 $1  00 

200  but  does  not  exceed          300 1  50 

300  but  does  not  exceed          400 2  00 

400  but  does  not  exceed          500 2  50 

500  but  does  not  exceed          600 3  00 

600  but  does  not  exceed          700 , .          3  50 

TOO  but  does  not  exceed          800 4  00 

800  but  does  not  exceed          900 4  50 

900  but  does  not  exceed       1,000 5  00 

1,000  but  does  not  exceed       1,100 6  00 

1,100  but  does  not  exceed       1,200 7  00 

1,200  but  does  not  exceed       1,300 8  00 

1,300  but  does  not  exceed       1,400 9  00 

1,400  but  does  not  exceed       1,500 10  00 

1,500  but  does  not  exceed       1,600 12  00 

1,600  but  does  not  exceed       1,700 14  00 

1,700  but  does  not  exceed       1,800 16  00 

1,800  but  does  not  exceed      1,900 18  00 

1,900  but  does  not  exceed      2,000 20  00 

f  $20  plus  two  per  centum  upon  and 

2,000 -{  with  respect  to  all  taxable  income  in 

excess  of  two  thousand  dollars. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  225 

§  351.  Administration  and  assessment.  Except  as  otherwise 
provided  herein  the  state  tax  commission  shall  administer  and  en- 
force the  tax  herein  imposed,  for  which  purpose  it  may  divide  the 
state  into  districts,  in  each  of  which  a  branch  office  of  the  commis- 
sion may  be  maintained  in  charge  of  an  agent.  Unless  limited  by 
order  of  the  tax  commission,  each  such  agent  shall  have  power  to 
receive  and  audit  returns  of  income  and,  when  so  designated  by 
the  comptroller,  to  collect  income  taxes,  and  shall  perform  such 
other  services  as  are  required  by  the  tax  commission. 

§  352.  When  returns  to  be  made.  1.  On  or  before  the  first  day 
of  March,  nineteen  hundred  and  seventeen,  and  annually  there- 
after, every  corporation  and  copartnership  subject  to  this  tax  and 
every  other  person  having  a  taxable  income  or  having  gross  in- 
come in  excess  of  fifteen  hundred  dollars  for  the  income  year, 
shall  render  to  the  tax  commission  a  true  and  accurate  report  of 
income  for  the  preceding  calendar  year.  Such  returns  shall  so 
far  as  may  be  set  forth  the  same  or  similar  items  called  for  in 
the  blank  forms  of  return  prescribed  by  the  United  States  com- 
missioner of  internal  revenue  for  the  enforcement  of  the  act  of 
congress  of  October  third,  nineteen  hundred  and  thirteen,  together 
with  such  other  facts  as  may  be  necessary  for  the  proper  enforce- 
ment of  this  act.  There  shall  be  annexed  to  such  return  the  affi- 
davit or  affirmation  of  the  president,  vice-president,  secretary,  ou 
treasurer  of  the  corporation,  of  two  members  of  the  copartnership, 
or  of  the  person  making  the  return,  to  the  effect  that  the  statements 
contained  therein  are  true.  Blank  forms  of  return  shall  be  fur- 
nished by  the  tax  commission  and  its  agents  upon  application,  but 
failure  to  secure  the  form  shall  not  release  any  person  from  the 
obligation  of  making  the  return  herein  required. 

2.  Corporations  and  copartnerships  which  customarily  close 
their  annual  accounts  on  a  date  other  than  B'ecember  thirty-first, 
or  which  customarily  estimate  their  income  or  profits  on  a  basis 
other  than  of  actual  cash  receipts  and  disbursements,  may,  with 
the  consent  of  the  tax  commission,  return  for  taxation  the  income 
earned  during  the  business  year  for  which  the  accounts  of  such 
persons  are  customarily  made  up.  In  the  case  of  persons  author- 
ized to  make  return  on  the  basis  of  a  fiscal  year  other  than  the 
calendar  year,  the  first  return  shall  cover  the  income  from  Jan- 
uary first,  nineteen  hundred  and  sixteen,  to  the  close  of  his  fiscal 
year  ending  in  nineteen  hundred  and  sixteen;  and  such  income 
shall  be  returned  and  taxes  paid  upon  and  with  respect  thereto, 
as  in  the  case  of  other  persons.  Thereafter  each  such  person  shall 


A. 


226  STATE  OF  NEW  YORK 

make  return  within  sixty  days  after  the  closing  of  his  fiscal  year, 
and  shall  pay  the  tax  to  the  state  comptroller  within  thirty  days 
after  receiving  notice  of  the  amount  of  tax  assessed,  in  accord- 
ance with  regulations  to  be  prescribed  by  the  tax  commission. 

3.  In  case  of  neglect  to  make  return  occasioned  by  sickness  or 
absence  of  any  person  required  to  make  said  return,  or  for  other 
sufficient  reason,  the  tax  commission  may  allow  such  further  time 
for  making  and  delivering  said  return  as  it  may  deem  necessary. 

§  353.  Consolidated  return  from  certain  corporations.  In  thq 
case  of  any  corporation  which  owns  all  of  the  stock  of  another 
or  subsidiary  corporation,  or  more  than  nine-tenths  of  such  stock, 
a  consolidated  return  shall  be  made,  including  the  income,  de- 
ductions and  other  required  data  for  both  parent  and  subsidiary 
corporation  or  corporations,  provided  that  such  corporations  con- 
stitute a  single  business  entity  or  enterprise,  and  provided  further, 
that  in  determining  net  income  for  their  own  purposes  no  recog- 
nition in  the  accounts  is  made  of  the  subsidiary  corporations  as 
distinct  operating  units.  In  the  case  of  any  corporation  which 
distributes  or  sells  its  goods  or  products  through  another  corpo- 
ration, and  such  goods  or  products  are  sold  or  transferred  to  such 
other  corporation  at  conventional  or  fictitious  prices  or  on  terms 
other  than  those  which  would  ordinarily  obtain  between  independ- 
ent corporations,  the  tax  commission  shall  require  such  corpora- 
tions or  either  of  them  to  furnish  a  consolidated  return  of  income, 
or  to  make  such  an  accounting  as  shall  accurately  show  the  true  net 
income  subject  to  the  tax  herein  imposed. 

§  354.  Powers  of  tax  commission;  revision  of  accounts.  1. 
If  in  the  opinion  of  the  tax  commission  any  return  of  income  is  in 
any  essential  respect  incorrect  it  shall  have  power  to  revise  such 
return,  or  if  any  person  liable  to  taxation  under  this  article  fails 
to  make  return  as  herein  required,  the  commission  is  author- 
ized to  make  an  estimate  of  the  taxable  income  of  such  person 
from  any  information  in  its  possession,  and  to  order  and  state 
an  account  according  to  such  revised  return  or  the  estimate  so 
made  by  it  for  the  taxes,  penalties  and  interest  due  the  state 
from  such  person.  The  tax  commission  shall  also  have  power 
to  examine  or  cause  to  have  examined,  in  case  of  failure  to  report 
or  in  case  the  return  is  unsatisfactory  to  it,  the  books  and  rej- 
ords  of  any  such  person,  and  may  hear  testimony  and  take  proofs 
material  for  its  information.  In  case  any  return  is  revised  01 
any  taxable  income  estimated,  the  tax  commission  shall  notify 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  227 

the  taxpayer  of  its  action  and  of  a  time  and  place  at  which.  oppor- 
tunity  will  be  given  to  be  heard  in  respect  thereof.  Such  notice 
may  be  mailed  to  the  postoffice  address  of  the  taxpayer.  The 
determination  of  the  tax  commission  shall  be  subject  to  review 
by  certiorari  in  the  manner  prescribed  in  sections  one  hundred 
and  ninety-nine  and  two  hundred  of  the  tax  law.  Subject  to  the 
rights  of  notice,  appeal  and  hearing  herein  provided,  the  tax  com- 
mission may  revise  returns  or  make  estimates  of  taxable  income 
and  on  the  basis  of  such  returns  or  estimates  audit  and  state  ac- 
counts for  taxes  for  a  period  of  three  years  next  preceding  that  in 
which  such  revision  or  estimate  is  made. 

2.  The  provisions  of  section  one  hundred  and  ninety-eight  of  the 
tax  law  are  hereby  made  applicable  to  the  revision  and  readjust- 
ment of  accounts  for  income  taxes;  and  credits  in  favor  of  any 
taxpayer  resulting  from  such  revision  may  be  assigned  to  any 
other  person  subject  to  the  income  tax  in  the  same  way  and  with 
the  same  effect  as  though  the  credit  had  originally  been  allowed  in 
favor  of  such  assignee;  provided  that  applications  for  such  revi- 
sion may  be  made  within  three  years  from  the  time  any  such  ac- 
count shall  have  been  audited  and  stated. 

§  355.  Penalties.  1.  Any  person  required  by  law  to  make  re^ 
turn  of  income,  who  shall  fail  or  refuse  to  make  such  return  be- 
fore the  time  at  which  accounts  for  income  taxes  are  required 
to  be  certified  to  the  comptroller,  shall  upon  conviction  be  fined 
not  less  than  twenty  dollars  and  not  more  than  five  hundred  dol- 
lars, at  the  discretion  of  the  court. 

2.  If  any  such  person  shall  fail  or  refuse  to  make  a  return  of 
income  at  the  time  or  times  hereinbefore  specified,  but  shall 
voluntarily  make  a  correct  return  of  income  before  the  time  at 
which  accounts  for  income  taxes  are  required  to  be  certified  to 
the  comptroller,  there  shall  be  added  to  his  tax  five  per  centum 
of  the  amount  otherwise  due,  but  such  additional  amount  shall 
in  no  case  be  less  than  two  dollars  nor  more  than  five  hundred 
dollars. 

3.  If  any  person  liable  to  taxation  under  this  article  fails 
to  make  a  return  as  hereinbefore  required,  or  if  in  any  return 
he  wilfully  omits  or  understates  any  item  of  income,  or  wilfully 
overstates  any  deduction  or  loss,  or  makes  any  statement  with 
false  or  fraudulent  intent,  and  an  additional  amount  is  discovered 
to  be  taxable,  the  amount  so  discovered  shall  be  subject  to  twice 
the  ordinary  rate  of  taxation.     The  amount  so  added  to  the  tax 
shall  be  collected  at  such  time  and  in  such  manner  as  may  be 


228  STATE  OF  NEW  YORK 

designated  by  the  tax  commission.     This  penalty  shall  be  addi- 
tional to  all  other  penalties  in  this  or  any  other  act  provided. 

4.  Any  person  required  by  law  to  make,  render,  sign  or  verify 
any  return,  who  makes  any  false  or  fraudulent  return  or  state- 
ment, with  intent  to  evade  any  tax  imposed  by  this  act,  shall 
upon  conviction  be  fined  not  to  exceed  five  hundred  dollars  or 
be  imprisoned  not  to  exceed  one  year,  or  both,  at  the  discretion 
of  the  court,  with  the  cost  of  prosecution. 

§  356.  Certification  of  assessment  to  comptroller.  On  or 
before  the  first  day  of  September  in  each  year  the  tax  commis- 
sion shall  audit  and  state  the  account  of  each  person  reporting 
income  for  the  calendar  year,  shall  compute  the  tax  thereon  and 
forthwith  certify  the  same  to  the  state  comptroller  for  collection. 

§  357.  Notice  of  assessment.  Every  return  of  income  shall 
contain  the  post  office  address  of  the  taxpayer  and  lines  or  spaces 
upon  which  the  taxpayer  shall  enter  the  net  income  which  he 
believes  to  be  taxable  under  the  provisions  of  this  article  and 
the  amount  of  tax  due  thereupon  or  with  respect  thereto.  If 
such  amount  is  accepted  by  the  tax  commission  as  correct  no 
further  notice  of  assessment  need  be  given,  but  in  case  of  revision 
the  taxpayer  shall  be  notified  and  given  opportunity  to  be  heard 
as  provided  in  section  three  hundred  and  fifty-four.  Such  notice 
may  be  sent  by  mail  to  the  post  office  address  given  in  the  re- 
turn, and  a  record  that  such  notice  has  been  sent  shall  be  pre- 
served by  the  tax  commission  or  its  agent. 

§  358.  When  payable.  1.  The  tax  herein  imposed  shall  be 
paid  to  the  state  comptroller  or  to  the  authorized  collecting  agents 
of  such  comptroller,  and  except  as  hereinbefore  provided  for  per- 
sons computing  income  on  a  basis  other  than  the  calendar  year, 
shall  be  paid  on  or  before  the  first  day  of  October  of  each  year. 
The  comptroller  is  authorized  at  his  discretion  and  with  the  con- 
sent of  the  tax  commission  to  designate  the  agents  mentioned  in 
section  three  hundred  and  fifty-one  as  collectors  for  the  purpose 
of  collecting  income  taxes,  and  may  require  bond  from  such 
officers.  The  cost  of  such  bond  shall  be  audited  and  paid  as  are 
the  other  expenses  of  such  agents,  but  no  such  agent  shall  be 
entitled  to  any  additional  salary,  fee  or  compensation  for  service 
rendered  in  the  collection  of  such  taxes. 

2.  If  the  tax  imposed  by  this  article  be  not  paid  on  or  before 
October  first,  or  in  the  case  of  additional  taxes,  at  the  time 
designated  by  the  tax  commission,  the  person  liable  to  such  tax- 
shall  pay  to  the  state  comptroller  in  addition  to  the  amount  of 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  22*9 

such  tax  ten  per  centum  of  said  amount,  plus  one  per  centum 
for  each  month  the  tax  remains  unpaid.  Each  such  tax  shall  be 
a  lien  upon  and  bind  all  the  real  and  personal  property  of  the 
person  liable  to  pay  the  same  from  the  time  when  it  is  payable 
until  the  same  is  paid  in  full. 

§  359.  Warrant  for  the  collection  of  taxes.  If  the  tax  im- 
posed by  this  article  be  not  paid  within  thirty  days  after  the 
same  becomes  due,  unless  an  appeal  or  other  proceeding  shall 
have  been  taken  to  review  the  same,  the  comptroller  may  issue 
a  warrant  under  his  hand  and  official  seal  directed  to  the  sheriff 
of  any  county  of  the  state  commanding  him  to  levy  upon  and  sell 
the  real  and  personal  property  of  the  person  owing  the  same, 
found  within  his  county,  for  the  payment  of  the  amount  thereof, 
with  the  added  penalties,  interest  and  the  cost  of  executing  the 
warrant,  and  to  return  such  warrant  to  the  comptroller  and  pay 
to  him  the  money  collected  by  virtue  thereof  by  a  time  to  be 
therein  specified,  not  less  than  sixty  days  from  the  date  of  the 
warrant.  Such  warrant  shall  be  a  lien  upon  and  shall  bind  the 
real  and  personal  property  of  the  person  against  whom  it  is  issued 
from  the  time  an  actual  levy  shall  be  made  by  virtue  thereof. 
The  sheriff  to  whom  any  such  warrant  shall  be  directed  shall 
proceed  upon  the  same  in  all  respects,  with  like  effect,  and  in 
the  same  manner  as  prescribed  by  law  in  respect  to  executions 
issued  against  property  upon  judgments  of  a  court  of  record, 
and  shall  be  entitled  to  the  same  fees  for  his  services  in  executing 
the  warrant,  to  be  collected  in  the  same  manner.  In  the  discre- 
tion of  the  comptroller  a  warrant  of  like  terms,  force  and  effect 
may  be  issued  and  directed  to  any  agent  authorized  to  collect 
income  taxes,  and  in  the  execution  thereof  such  agent  shall  have 
all  the  powers  conferred  by  law  upon  sheriffs,  but  shall  be  entitled 
to  no  fee  or  compensation  in  excess  of  actual  expenses  paid  in 
the  performance  of  such  duty. 

§  360.  Action  for  recovery  of  taxes:  Forfeiture  of  charter  by 
delinquent  corporations.  Action  may  be  brought  at  any  time  by 
the  attorney-general  at  the  instance  of  the  comptroller,  in  the 
name  of  the  state,  to  recover  the  amount  of  any  taxes,  penalties 
and  interest  due  under  this  article.  If  such  taxes  be  not  paid 
within  one  year  after  the  same  be  due,  and  the  comptroller  is  sat- 
isfied the  failure  to  pay  the  same  is  intentional  he  shall  so  report 
to  the  attorney-general,  who  shall  immediately  bring  an  action 
in  the  name  of  the  people  of  the  state,  for  the  forfeiture  of  the 
charter  or  franchise  of  any  corporation,  joint  stock  company  or 


* 


230  STATE  OF  NEW  YORK 

association  failing  to  make  such  payment,  and  if  it  found  that 
such  failure  was  intentional,  judgment  shall  he  rendered  in  each 
action  for  the  forfeiture  of  such  charter  and  for  its  dissolution  if 
a  domestic  corporation  and  if  a  foreign  corporation  for  the  an- 
nulment of  its  franchise  to  do  business  in  this  state. 

§  361.  Distribution  of  the  tax.  Of  the  revenue  collected  under 
this  article  twenty  per  cent,  shall  he  paid  into  the  state  treasury 
to  the  credit  of  the  general  fund  and  the  residue  on  or  before 
the  first  day  of  February  in  each  year,  shall  be  distributed  and 
paid  by  the  state  comptroller  to  the  treasurers  of  the  several 
counties  of  the  state,  in  proportion  to  the  aggregate  amount  of 
assessment  for  each  county  as  found  by  the  state  board  of  equaliza- 
tion in  the  last  preceding  state  equalization  of  assessment.  As  to 
any  county  included  in  the  city  of  New  York  such  payment  shall 
be  made  to  the  receiver  of  taxes  in  such  city  and  be  paid  into  the 
general  fund  for  city  purposes.  The  county  treasurer  shall  ap- 
portion  the  amount  so  received  among  the  several  towns  and  cities 
within  the  county  in  proportion  to  their  valuations  as  equalized 
by  the  board  of  supervisors  at  its  last  annual  meeting,  and  shall 
credit  the  amount  apportioned  to  each  city  or  town  against  the 
county  tax  payable  by  it.  If  in  a  county  not  wholly  included  in 
a  city,  the  amount  of  such  credit  to  a  city  or  town  exceeds  the 
county  tax  from  such  city  or  town,  the  excess  shall  be  paid  to  the 
supervisor  of  the  town  or  fiscal  officer  of  the  city  and  be  by  him 
credited  to  general  town  or  city  purposes. 

§  362.  The  tax  on  salaries  paid  to  non-residents  to  be  with- 
held by  employers.  1.  The  word  "  salary  "  as  used  in  this  sec- 
tion shall  be  deemed  to  include  salaries,  wages,  fees,  commissions, 
gratuities,  emoluments,  perquisites  and  other  compensation  of 
whatever  kind  and  in  whatever  form  paid,  received,  or  earned 
and  subject  to  taxation  under  the  provisions  of  this  article. 

2.  Every  employer  or  person  (hereinafter  called  "payor") 
who  shall  in  the  year  nineteen  hundred  and  sixteen  or  in  any 
subsequent  year  pay  or  become  liable  to  a  non-resident  (herein- 
after called  "  payee  ")  for  a  salary  or  salaries  at  a  rate  exceeding 
fifteen  hundred  dollars  a  year,  shall,  on  behalf  of  said  payee  de- 
duct and  withhold  from  the  payment  the  following  sums: 

One-half  of  one  per  centum  upon  all  amounts  paid  at  a  ra,te 
exceeding  fifteen  hundred  dollars  but  not  exceeding  twenty-four 
hundred  dollars  a  year. 

One  per  centum  upon  all  amounts  paid  at  a  rate  exceeding 
twenty-four  hundred  dollars,  but  not  exceeding  thirty-six  hun- 
dred dollars  a  year. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  231 

Two  per  centum  upon  all  amounts  paid  at  a  rate  exceeding 
thirty-six  hundred  dollars  a  year,  and  upon  all  salaries  the  rate 
of  which  reckoned  on  a  yearly  basis  is  uncertain  or  unknown. 

Said  amounts  shall  be  withheld  at  the  first  time  of  payment 
after  the  approval  of  this  act  upon  the  salary  previously  paid  in 
the  year  nineteen  hundred  and  sixteen,  and  thereafter  shall  be 
withheld  upon  each  payment  when  it  is  made. 

3.  Every  payor  required  by  this  section  to  withhold  any  por- 
tion of  any  salary  shall,  between  the  first  day  of  March  and  the 
first  day  of  April  of  the  next  succeeding  year,  pay  to  the  state 
comptroller  all  sums  required  to  be  withheld  which  he  has  not 
returned  to  the  payee  in  accordance  with  the  following  subdivi- 
sion of  this  section,  retaining  one  per  centum  thereof  for  the 
expense  and  labor  of  collection,  and  shall  within  the  same  period 
make  and  file  with  the  tax  commission  or  its  proper  agent  a  return 
under  oath,  in  such  form  as  shall  be  prescribed  by  said  commis- 
sion, setting  forth  the  name  of  every  payee  from  whose  salary 
he  is  required  to  make  such  deduction,  the  receipts  of  such  payees 
as  have  filed  returns  on  their  own  behalf  or  satisfied  the  require- 
ments of  the  law  as  hereinafter  provided,  and  such  other  informa- 
tion as  shall  be  required  by  said  commission. 

4.  Any  such  payee  may  between  the  second  day  of  January  and 
the  first  day  of  March  file  with  the  tax  commission  or  its  proper 
agent  a  full  and  complete  return  of  income ;  and  upon  the  accept- 
ance and  approval  of  such  return  shall  be  furnished  with  a  state- 
ment that  no  tax  is  due  or  with  a  tax  bill  reciting  the  amount  of 
income  and  the  tax  due  thereon,  as  the  case  may  be.     Such  tax 
shall  be  computed  at  the  rates  prescribed  in  section  three  hundred 
and  fifty  of  this  article.     Immediately  thereupon  said  payee  shall 
be  entitled  to  pay  said  tax  to  the  state  comptroller  and  receive  his 
receipt  therefor.     In  the  payment  of  such  tax,  said  payee  shall 
be  entitled  to  a  deduction  for  prepayment  of  two  percentum  of 
the  amount  of  tax  due.     Upon  the  presentation  and  surrender  of 
said  receipt  or  statement  that  no  tax  is  due  to  said  payor,  the 
payee  shall  be  entitled  to  receive  all  the  sums  withheld  by  said 
payor  on  his  behalf ;  and  said  statements  or  receipts  shall  be  filed 
with  the  tax  commission  or  its  proper  agent,   as  hereinbefore 
provided. 

5.  Any  non-resident  payee  subject  to  state  or  local  income  tax 
at  his  domicile  upon  any  salary  as  herein  defined,   shall  upon 
proof  thereof  made  in  the  manner  and  form  prescribed  by  the  tax 


232  STATE  OF  NEW  YORK 

commission,  be  charged  for  only  one-half  the  tax  that  would  be 
otherwise  due  under  the  provision  of  this  section. 

§  363.  Persons  acting  in  a  fiduciary  capacity.  1.  The  word 
"  representative  "  as  used  in  this  section  shall  be  deemed  to  in- 
clude guardians,  trustees,  agents,  receivers,  assignees,  executors, 
administrators,  committees  and  all  persons  acting  in  any  fiduciary 
capacity,  residing  within  this  state  or  appointed  by  a  court  of  this 
state.  The  word  "  beneficiary  "  as  used  in  this  section  shall  be 
deemed  to  include  any  and  all  persons  whom  such  representative 
succeeds  or  for  whom  he  acts. 

2.  Every  such  representative  shall  make   and  render  to  the 
tax  commission  a  verified  return  of  the  income  received  by  him  in 
his  representative  capacity  together  with  all  income,  if  any,  re- 
ceived during  the  year  by  a  ward,  deceased  or  incompetent  person, 
and  shall  be  liable  to  taxation  therefor  subject  to  the  deductions 
and  exemptions  authorized  in  this  article;  provided  that  every 
executor  or  administrator  shall  be  allowed  the  deductions  and  ex- 
emptions to  which  the  deceased  would  have  been  entitled  had  he 
lived,  and  provided  further  that  in  the  case  of  any  ward  having  a 
parent  living  the  specific  personal  deduction  shall  be  limited  to 
one  hundred  dollars,  and  provided  further  that  no  deduction  or 
exemption  shall  be  allowed  which  has  been  otherwise  claimed  by 
or  for  any  beneficiary.     Income  received  by  a  trustee  shall  be 
taxed  or  not  according  as  the  beneficiary  resides  within  or  without 
the  state;  but  nothing  herein  shall  be  construed  to  exempt  from 
taxation  income  derived  from  property  located  or  business  trans- 
acted within  the  state. 

3.  The  provision  of  this  section  shall  not  apply  to  trusts  whose 
property  is  represented  by  transferable  certificates  or  by  capital 
stock  divided  into  transferable  shares,  and  such  trusts  shall  make 
return  of  income  and  be  taxed  as  corporations. 

§  364.  Tax  commission  authorized  to  make  such  regulations 
and  to  collect  such  facts  as  are  necessary  to  enforce  this  article. 
The  tax  commission  is  hereby  authorized  to  make  such  rules  and 
regulations,  and  to  require  such  facts  and  information  to  be  re- 
ported, as  are  necessary  to  enforce  the  provisions  of  this  article. 
Without  limitations  of  the  general  powers  herein  conferred,  said 
commission  is  specifically  authorized  at  its  discretion:  A 

(a)  To  require  every  person  within  the  jurisdiction  of  the 
state,  whether  subject  to  this  tax  or  not,  to  furnish  or  return  at 
prescribed  intervals,  a  list  of  the  payments  for  rent,  interest, 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  233 

wages  and  other  specified  purposes  which  he  has  made  during 
such  intervals,  or  copies  of  receipts  for  such  payments,  particu- 
larly when  made  to  or  to  the  credit  of  persons  subject  to  this  tax; 
and 

(b)  To  require  every  such  person  buying  or  accepting  for  col- 
lection or  deposit  any  coupon  or  interest  order  to  secure  from  the 
owner  thereof  and  transmit  to  the  tax  commission  at  prescribed 
intervals,  an  ownership  certificate  stating  the  name  and  address 
of  the  owner,  and  such  other  facts  as  may  be  helpful  or  necessary 
in  determining  whether  such  interest  or  income  is  subject  to  this 
tax.  Information  required  under  the  provision  of  this  section 
may,  when  authorized  by  the  tax  commission  and  at  the  option  of 
the  respondent,  be  returned  on  copies  or  duplicates  of  the  forms 
prescribed  by  the  commissioner  of  internal  revenue  for  the  en- 
forcement of  the  act  of  congress  of  October  three,  nineteen  hun- 
dred and  thirteen. 

§  365.  Secrecy  required  of  officials.  Penalty  for  violation. 
1.  It  shall  be  unlawful  for  any  tax  commissioner,  agent,  clerk 
or  other  officer  or  employee  to  divulge  or  make  known  in  any 
manner  whatever  not  provided  by  law  the  amount  or  source  of  in- 
come, profits,  losses,  expenditures,  or  any  particular  thereof,  set 
forth  or  disclosed  in  any  return  of  income,  or  to  permit  any  such 
returns  or  copy  thereof  or  any  book  containing  any  abstract  or 
particulars  thereof  to  be  seen  or  examined  by  any  person  except 
as  provided  by  law.  Nothing  herein  shall  be  construed  to  pro- 
hibit the  publication  of  general  statistics  so  classified  as  to  pre- 
vent the  identification  of  particular  returns  and  the  items  thereof, 
or  the  publication  of  delinquent  lists  showing  the  names  of  tax- 
payers who  have  failed  to  pay  their  taxes  at  the  time  and  in  the 
manner  provided  by  section  three  hundred  and  fifty-eight  to- 
gether with  any  relevant  information  which  in  the  opinion  of  the 
comptroller  may  assist  in  the  collection  of  such  delinquent  taxes; 
or  the  inspection  by  the  attorney-general  or  other  legal  represen- 
tative of  the  state  of  the  income  return  of  any  taxpayer  who  shall 
bring  action  to  set  aside  or  review  the  tax  based  thereon,  or 
against  whom  action  or  proceedings  have  been  instituted  in  ac- 
cordance with  the  provisions  of  section  three  hundred  and  fifty- 
five  or  three  hundred  and  sixty  of  this  article. 

2.  Any  offense  against  the  foregoing  provision  shall  be  pun- 
ished by  a  fine  not  exceeding  one  thousand  dollars  or  by  im- 
prisonment not  exceeding  one  year,  or  both,  at  the  discretion  of 
the  court;  and  if  the  offender  be  an  officer  or  employee  of  the 


234  STATE  OF  NEW  YOEK 

state  lie  shall  be  dismissed  from  office  and  be  incapable  of  holding 

any  public  office  in  this  state  for  a  period  of  five  years  thereafter. 

§  366.  Persons  liable  to  income  tax  exempt  from  personal 
property  tax  and  from,  the  provisions  of  sections  twelve,  one  hun- 
dred and  eighty-two  and  one  hundred  and  ninety-two  of  the  tax 
law.  After  the  first  day  of  January,  nineteen  hundred  and  seven- 
teen, persons  liable  to  the  income  tax  shall  not  be  assessed  for 
taxation  on  personal  property  as  defined  in  article  one  of  the  tax 
law,  but  bank  stock  and  rents  taxable  as  personal  property  under 
the  provisions  of  section  eight  of  the  tax  law,  shall  be  assessed 
and  taxed  as  heretofore.  After  the  fifteenth  day  of  January, 
nineteen  hundred  and  seventeen,  corporations  liable  to  the  income 
tax  shall  not  be  assessed  or  taxed  upon  their  corporate  stock  as 
provided  in  section  twelve,  nor  shall  they  be  required  to  pay  th< 
franchise  tax  imposed  by  section  one  hundred  and  eighty-two,  n( 
to  make  the  report  called  for  in  section  one  hundred  and  ninety- 
two  of  the  tax  law.  For  the  purpose  of  this  section  every  person 
shall  be  deemed  to  be  liable  to  the  income  tax  who  is  not  specifi- 
cally excepted  from  such  liability  by  the  provisions  of  section 
three  hundred  and  forty-eight.  Nothing  herein  shall  be  con- 
strued to  impair  the  obligation  to  pay  franchise  taxes  due  on  or 
before  the  fifteenth  day  of  January,  nineteen  hundred  and  seven- 
teen, or  taxes  on  personal  property  or  corporate  stock  assessed  in 
the  year  nineteen  hundred  and  sixteen,  whether  payable  in  that 
year  or  not. 

§  2.  Invalidity  of  part  of  this  act  not  to  affect  the  remainder. 
If  any  clause,  sentence,  paragraph  or  part  of  this  act  shall  for 
any  reason  be  adjudged  by  any  court  of  competent  jurisdiction 
to  be  invalid,  such  judgment  shall  .not  affect,  impair,  or  invalidate 
the  remainder  of  said  act,  but  shall  be  confined  in  its  operation  to 
the  clause,  sentence,  paragraph,  or  part  thereof  directly  involved 
in  the  controversy  in  which  such  judgment  .shall  have  been  ren- 
dered. 

§  3.  Except  as  otherwise  provided  herein  this  act  shall  take 
effect  immediately. 


APPENDICES 


[235] 


APPENDIX  All 

REVENUE  RECEIPTS  OF  STATES,  COUNTIES  AND  INCORPORATED 
PLACES  (INCLUDING  TOTAL  REVENUE  RECEIPTS,  GENERAL  PROP- 
ERTY TAXES  AND  SPECIAL  PROPERTY  TAXES,  BUT  NOT  THIR- 
TEEN OTHER  CLASSES  OF  REVENUE  RECEIPTS  LISTED  BY 

CENSUS)  * 


STATES 

Population 

Total 

Per 

capita 

General 
property 
taxes 

Special 
property 
taxes 

Total  

97,163,330 

$1,845,901,128 

$19  00 

$1,082,971,468 

$83,960,118 

States 

96  815  253 

$367  585  331 

$3  80 

$139  750  303 

$67  675  933 

Counties  
Incorporated  places  .  . 

85,738,717 
45,682,236 

370,043,046 
1,108,272,751 

4  32 
24  26 

282,077,069 
661,144,096 

805,419 
15,478,766 

Alabama  

2,238,614 

$16,675,494 

$7  45 

$9,410,110 

$142,940 

State 

2  238  614 

$5  966  208 

$2  67 

$3  500  148 

$96  472 

Counties     

2,238,614 

5,175,597 

2  31 

4  ,  203  ,  525 

46  468 

Incorporated  places 

410,707 

5,533,689 

13  53 

1,706,437 

Arizona  

230,808 

6,294,701 

27  27 

4,561,146 

173 

State  

230,808 

$1,539,147 

$6  67 

$1,252,573 

$173 

Counties  
Incorporated  places 

230,808 
70,021 

3,398,239 
1,357,315 

14  72 
19  38 

2,741,182 
567,391 

Arkansas  

1,659,859 

10,579,487 

6  37 

7,306,567 

221,115 

State  

1,659,859 

$3,454,081 

$2  08 

$2,737,926 

$221  115 

Counties          

1  ,  659  ,  859 

4,037,669 

2  43 

3  ,  293  ,  668 

Incorporated  places 

217,381 

3,087,737 

14  20 

1,274,973 

California       

2,667,516 

123,195,750 

46  18 

69,433,033 

3  273  158 

State  

2,667,516 

$19,775,003 

$7  41 

$1,361,887 

$3  237  158 

Counties             .... 

2,226,521 

42,997,382 

19  31 

34,825,081 

Incorporated  places 

1,689,400 

60,423,365 

35  77 

33,246,065 

Colorado              

883,276 

19,161,098 

21  69 

12,950,354 

280  701 

State  

883,276 

$2,727,954 

$3  09 

$1,578,697 

$280  701 

Counties 

645,391 

5,900,076 

9  14 

5,081,575 

Incorporated  places 

442,586 

10,533,068 

23  80 

6,290,082 

Connecticut  

1,181,793 

25,545,578 

21  62 

13,531,984 

5,072,233 

State  

1,181,793 

$5,497,195 

$4  65 

$4  256  021 

Counties 

1,181,793 

673,305 

0  57 

$261,368 

Incorporated  places 
Delaware    .  .        ... 

1,058,117 
208,036 

19,375,078 
2,790,438 

18  31 
13  41 

13,270,616 
1,494,235 

816,212 
27  494 

State  

208,036 

$713,348 

$3  43 

$26,662 

Counties             .  .    . 

208,036 

735,223 

3  53 

$620,250 

Incorporated  places 
District  of  Columbia 

100,627 
348,077 

1,341,867 
14,438,046 

13  34 
41  48 

873,985 
5,557,090 

832 

Incorporated  places 

348,077 

$14,438,046 

$41  48 

$5,557,090 

Florida  

825,420 

12,101,112 

14  66 

7,360,475 

$31,681 

State 

825,420 

$2,980,334 

$3  61 

$1,478,479 

$2  295 

Counties  

810,899 

5,071,256 

6  26 

3,916,582 

29,386 

Incorporated  places 

236,640 

4,049,522 

17  11 

1,965,414 

Georgia  

2,736,737 

26,293,393 

9  61 

16,269,128 

State 

2,736,737 

$5,778,440 

$2  11 

$4,037,908 

Counties  

2,736,737 

9,956,971 

3  64 

7,109,105 

Incorporated  places 

573,057 

10,557,982 

18  42 

5,122,115 

Idaho  

378,818 

6,734,155 

17  78 

4,207,142 

$97,887 

State             

378,818 

$1,936,279 

$5  11 

$1,004,830 

Counties 

378,818 

3,012,221 

7  95 

2,363  656 

Incorporated  places 

81,718 

1,785,655 

21  85 

838,656 

237] 


* 


238 


STATE  OF  NEW  YORK 


APPENDIX  All  —  Continued 


STATES 

Population 

Total 

Per 

ca-pita 

General 
property 
taxes 

Special 
property 
taxes 

Illinois        

5,904,043 

$118,579,747 

$20  08 

$67  821,281 

$1  612  818 

State  
Counties 

5,904,043 
5,904  043 

$14,025,769 
15  873  765 

$2  38 
2  69 

$8,091,832 
12  374  734 

$1,612,818 

Incorporated  places 

3,710,769 

88,680,213 

23  90 

47,354,715 

2  760  792 

43  767  765 

15  85 

27  906  304 

170  585 

State 

2  760  792 

$8  425  385 

$3  05 

$6  182  813 

$170  585 

Counties  

2  ,  760  ,  792 

11,652,870 

4  22 

8,698,167 

Incorporated  places 

1,214  030 

23,689  510 

19  51 

13  025  324 

2,222,472 

36,428,647 

16  39 

24,233  876 

280,733 

State         

2,222,472 

$6,098,459 

$2  74 

$3,658,488 

$280,733 

2  222  472 

16  564  437 

7  45 

11  403  433 

Incorporated  places 

711,662 

13,765,751 

19  34 

9,171,955 

Kansas  

1,762,573 

24,164,614 

13  71 

16,395,281 

170,234 

State  

1,762,573 

$5,379,229 

$3  05 

$3,310,048 

$170,234 

Counties 

1,685,621 

7,432,155 

4  41 

6,525,401 

522  478 

11  353  230 

21  73 

6  559  832 

2  336  277 

26  722  060 

11  44 

15  733  715 

461,956 

State 

2  336  277 

$7  688  194 

$3  29 

$4  318  990 

$461,956 

Counties  

2,336,277 

8,607,899 

3  68 

5  ,  246  ,  650 

Incorporated  places 

574,890 

10  425  967 

18  14 

6  168  075 

1,745,658 

22,739,066 

13  03 

14,515,346 

207,004 

State                

1,745,658 

$7,096,702 

$4  07 

$4,386,920 

$207  ,  004 

1  389  700 

6  013  822 

4  33 

4  187  527 

523  214 

9  628  542 

18  40 

5  940  899 

Maine         

757,936 

12,966,150 

17  11 

7,366,586 

275,318 

State       

757,936 

$5,063,526 

$6  68 

$2,498,591 

$275,318 

757  936 

879  012 

1  16 

674  172 

389  364 

7  023  61? 

18  04 

4  193  823 

Maryland  

1,330,209 

26,029,645 

19  57 

15,156,991 

725,166 

State  

1,330,209 

$5,294,  >f6 

$3  98 

$2,129,364 

$525,426 

Counties      

755  ,  634 

5,700,921 

7  54 

4  ,  156  ,  772 

31,023 

Incorporated  places 

677,147 
3  548  705 

15,034,448 
124  350  892 

22  20 
35  04 

8,870,855 
69  173,958 

168,717 
12,278,551 

State 

3,548  705 

$25  742  902 

$7  25 

$6  252,161 

$5,056,514 

2  761  574 

3  435  938 

1  24 

2  727  983 

Incorporated  places 
Michigan 

3,294,319 
2,936,618 

95,172,052 
52  979  446 

28  89 
18  04 

60,193,814 
36,461,096 

7,222,037 
889,621 

State         

2,936,618 

$12,806,666 

$4  36 

$10,875,862 

$628,831 

2  936  618 

8  642  466 

2  94 

6,045,366 

253,527 

Incorporated  places 
Minnesota  

1,431,059 
2,181,077 

31,530,314 
44,089,229 

22  03 
20  21 

19,539,868 
23,221,369 

7,263 
1,080,115 

State 

2  181  077 

$14  033  962 

$6  43 

$4  201  828 

$714,905 

Counties  
Incorporated  places 

Mississippi 

2,181,077 
914,301 

1  876  987 

8,245,936 
21,809,331 

14  612  702 

3  78 
23  85 

7  79 

5,843,122 
13,176,419 

8,383,108 

241,788 
123,422 

44,907 

State  

1,876  987 

$3  694  027 

$1  97 

$2,325,705 

$44,907 

1  876  987 

7  719  846 

4  11 

4  308  549 

217  561 

3  198  829 

14  70 

1*748'  854 

Missouri  

3,353,983 

58  555,630 

17  46 

30,825,369 

1,141,124 

State 

3  353  983 

$8  243  849 

$2  46 

$3  ,  222  ,  363 

$479,517 

Counties  

2,630,636 

11,051  008 

4  20 

7,830,979 

Incorporated  places 

1,465,008 

39,260,773 

26  80 

19,772,027 

661,607 

JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


239 


APPENDIX  All  —  Continued 


STATES 

Population 

Total 

Per 
capita 

General 
property 
taxes 

Special 
property 
taxes 

419,174 

$12  803  151 

$30  54 

$7  864  865 

$25  004 

State         

419,174 

$2,642,075 

$6  30 

$905  746 

$20  036 

419,174 

6  259  720 

14  93 

5  258  998 

4  968 

Incorporated  places 

141,253 

3,901,356 

27  62 

1,700,121 

1,233,122 

17  998  117 

14  60 

12  194  263 

137  131 

State             

1,233,122 

$3,761,392 

$3  05 

$2  187  597 

$71  872 

1,233,122 

6  597  146 

5  35 

5  757  843 

65  259 

Incorporated  places 

321,770 

7  ,  639  ,  579 

23  74 

4,248,823 

Nevada                 .    ... 

94  722 

2  967,919 

31  33 

2  118  933 

* 

State       

94  ,  722 

$970,540  1 

$10  25 

$601  948 

Counties  

94  ,  722 

1,692,809 

17  87 

1,331,012 

Incorporated  places 

15,434 

304  ,  570 

19  73 

185,973 

436  740 

7  054  912 

16  15 

4  655  153 

$483  344 

State 

436  740 

$1  793  881 

$4  11 

$1  178  347 

$220  601 

Counties  

436,740 

756,701 

1  75 

552  ,  535 

Incorporated  places 

262,907 
2  749  486 

4,504,330 
68  684  931 

17  13 
24  98 

2,924,271 
39  613  391 

262,743 
758  599 

State 

2  749  486 

$15  425  547 

$5  61 

$9  877  039 

$748  086 

Counties  
Incorporated  places 

New  Mexico          .... 

2,749,486 
2,056,856 

370  185 

11,653,749 
41,605,635 

3,104,833 

4  24 
20  23 

8  39 

9,108,329 
20,628,023 

2,232,145 

10,513 
32  503 

State..  

370,185 
370  185 

$797,423 
1  765,421 

$2  15 
4  77 

$529  ,  143 
1  408  799 

$28,078 
4  425 

Incorporated  places 

48,124 

541,989 

11  26 

294,203 

New  York 

9  712  954 

330  622  071 

34  04 

201  342  295 

28  399  306 

State                

9  712  954 

$52  013,706 

$5  36 

$6,187,819 

$22  183  580 

Counties  .  ,  

4,514,066 

17,721,855 

3  93 

12,694,846 

Incorporated  places 
North  Carolina  

7,755,439 
2,307,809 

260,886,510 
14,212,398 

33  65 
6  16 

182,459,630 
9,386,831 

6,215,726 
5,265 

State 

2  307  809 

$3  294  223 

$1  43 

$1  969  056 

$5  265 

Counties  

2,307,809 

6,445,604 

2  79 

5,011,003 

339  758 

4  472,571 

13  16 

2,406,772 

North  Dakota  

660  ,  849 

10,024,589 

15  17 

6,317,386 

State  

660  ,  849 

$3,251,350 

$4  92 

$1,240,338 

Counties 

660  849 

5,010,319 

7  58 

4,122,970 

66  620 

1  762  920 

26  46 

954,078 

Ohio 

4  965  169 

95  ,  669  ,  743 

19  27 

51,473,265 

$1,922,998 

State  

4,965,169 

$13,877,036 

$2  79 

$2,916,282 

$1,895,094 

4  965  169 

28,812,212 

4  80 

15,646,094 

27,904 

2  864  526 

57  980  495 

20  24 

32,910,889 

1  938  761 

18,391,968 

9  49 

12,252,427 

5,572 

State 

1,938,761 

$3,358,843 

$1  73 

$2,206,205 

$5,572 

1  938  761 

6  920,032 

3  57 

5,429,713 

366  947 

8  113  093 

22  11 

4  616  509 

Oregon  

756,988 

24,613,582 

32  52 

15,420,281 

262,138 

State  

756,988 

$3,847,371 

$5  08 

$2,541,696 

$262,138 

756  988 

7  970,054 

10  53 

7,377,705 

Incorporated  places 

350,709 

12,796,157 

36  49 

5,500,880 

Pennsylvania  

8,107,942 

137,280,510 

16  93 

70,197,242 

18,876,538 

State  

8,107,942 

$28,571,882 

$3  52 

$1,256,609 

$18,876,538 

6  475  986 

17,640,063 

2  72 

12,552  663 

Incornorated  daces 

4.878.522 

81.068.565 

18  67 

56.387.970 

240 


STATE  OF  NEW  YORK 


APPENDIX  All  —  Concluded 


STATES 

Population 

Total 

Per 
capita 

General 
property 
taxes 

Special 
property 
taxes 

Rhode  Island  

579,665 

$13,627,651 

$23  51 

$8,065,197 

$535,032 

State             

579  ,  665 

$3  018  385 

$5  21 

$843  319 

$534  825 

Counties  

Incorporated  places 
South  Carolina   

557,768 
1,572,285 

10,609,266 
9,295  371 

19  02 
5  91 

7,221,878 
6  154  648 

207 
122  575 

State..  

1,572,285 
1,572  285 

$2,375,236 
3  515  661 

$1  51 
2  24 

$1,654,659 
2  766  600 

$122,575 

Incorporated  places 
South  Dakota  

237,836 
643,121 

3,404,474 
9,782,158 

14  31 
15  21 

1,733,389 
6,016,784 

9,781 

State         

643,121 

$3  151  538 

$4  90 

$1  547  545 

$9  781 

643  121 

4  600  068 

7  15 

3  128  460 

Incorporated  places 

80  ,  789 

2  030  552 

25  14 

1  340  779 

2  238  128 

22  191  231 

9  92 

12  794  563 

91  268 

State..  

2,238,128 
2  238  128 

$4,639,769 
9  210  586 

$2  07 
4  12 

$1,733,782 
6  888  484 

$91,268 

Incorporated  places 

467  ,  588 

8  340  876 

17  84 

4,172,297 

Texas  

4,171,997 

44,015,367 

10  55 

28,780,156 

541,971 

State          

4,171,997 

$12,598,297 

$3  02 

$6,328,327 

$541,971 

4,171  997 

13  100  016 

3  14 

11  063  779 

Incorporated  places 

1,032,272 

18,317  054 

17  74 

11,388,050 

Utah                 

404  ,  735 

9,551,375 

23  60 

5,802,191 

317,271 

State           

404,735 

$2,715,919 

$6  71 

$1,883,377 

$317,271 

404  ,  735 

2  307  108 

5  70 

1  849  235 

Incorporated  places 

189,769 

4,528,348 

23  86 

2  069,579 

Vermont  

359,957 

4,408,670 

12  25 

1,922,661 

746,547 

State..  

359,957 
359  957 

$1,952,770 
30  359 

$5  43 
0  08 

$184,319 
25  623 

$746,547 

Incorporated  places 

171,510 

2,425,541 

14  14 

1,712  719 

2,129,003 

20,734,314 

9  74 

11,175  929 

412,588 

State         

2,129,003 

$7  ,  176  ,  220 

$3  37 

$2  ,  539  ,  343 

$412,588 

1,674  340 

3  557  591 

2  12 

3  013  324 

Incorporated  places 

511,324 

10,000,503 

19  56 

5,623,262 

1  344  686 

44  984  021 

33  45 

23  701  723 

186  231 

State         

1  ,  344  ,  686 

$7,174,313 

$5  34 

$3,333,336 

$186,231 

1,344  686 

13,152  882 

9  78 

11  833  558 

Incorporated  places 

726,144 

24,656,826 

33  96 

3  ,  534  ,  829 

1  306  345 

10  609  218 

8  12 

6  314  812 

587  735 

State         

1,306,345 

$2,772,722 

$2  12 

$304  ,  756 

$587,735 

1,306,345 

3  975  059 

3  04 

3  697  582 

Incorporated  places 

252,095 

3,861,437 

15  32 

2,312,474 

2,419,898 

40,352,935 

16  68 

25  ,  857  ,  592 

1,003,771 

State       

2,419,898 

$11,380,681 

$4  70 

$6,818,729 

$924,736 

2,419,898 

8,319,451 

3  44 

6  006  871 

79,035 

1  066  688 

20  652  803 

19  36 

13  031  992 

Wyoming  

163,325 

3,125,248 

19  15 

2,041,191 

11,436 

State 

163  325 

$1  063  277 

$6  51 

$573  573 

$316 

Counties     

163,325 

1,250,566 

7  66 

1,112,196 

11,120 

45  455 

811  405 

17  85 

,;   *    .    355  422 

'    *    f    •     >'   fr  0.  ' 

*  Abstract  of  Special  Bulletins,  Wealth,  Debt  and  Taxation,  1913,  pp.  36-42. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


241 


APPENDIX  A  I  2 

ASSESSED  VALUE  OF  ALL  PROPERTY,  REAL  AND  PERSONAL,  SUBJECT 
TO  AD  VALOREM  TAXATION  IN  STATES,  1912.* 


GEOGRAPHIC 
DIVISION 
AND  STATE 

ASSESSED  VALUATION  OF  ALL  PROPERTY  SUBJECT  TO  AD  VALOREM 
TAXATION 

Total 

Real  property 
and 
improvements 

Personal 
property 

Other 
property 

Total 

$69,452,936,104 

$51,854,009,436 

$12,135,880,928 

$5,241,114,687 

New  England 
Maine  

$416,891,264 
439,683,132 
221,530,142 
-  4,803,078,625 
619,010,208 
1,041,334,019 

11,131,778,917 
2,490,490,534 
5,068,802,988 

6,481,059,158 
1,898,307,218 
2,343,673,232 
2,317,561,634 
2,466,636,793 

1,474,585,315 
992,092,597 
1,860,087,956 
293,048,119 
354,278,413 
463,371,889 
2,746,900,291 

93,814,011 
1,235,457,607 
359,932,253 
864,962,621 
1,168,012,658 
747,500,632 
291,531,003 
842,358,342 
212,887,518 

1,031,174,033 
625,686,792 
566,807,488 
411,551,004 

427,473,108 
550,517,808 
1,193,655,846 
2,532,710,050 

346,550,585 
167,512,157 
180,750,630 
422,330,199 
72,457,454 
140,338,191 
200,299,207 
101,087,082 

1,005,086,251 
905,011,679 
2,921,277,451 

$329,614,002 
299  ,  333  ,  340 
157,967,927 
3,216,714,460 
426,968,806 
880,054,721 

10,684,290,188 
1,880,407,662 
4,821,764,111 

4,335,665,521 
1,221,410,854 
1,648,500,546 
1,649,105,370 
1,723,425,870 

1,154,269,735 
547,544,903 
1,187,413,981 
199,070,599 
264,163,184 
319,049,627 
1,798,339,960 

89,541,628 
1,151,374,665 
330,322,487 
538,924,546 
633,747,633 
382,775,963 
152,052,298 
431,329,671 
140,200,555 

636,774,911 
447,552,416 
342,648,441 
240,104,986 

298,828,900 
368,449,430 
719,703,439 
1,650,198,381 

179,892,897 
132,531,537 
81,270,500 
280,766,698 
34,682,427 
84,328,045 
109,625,848 
83,667,525 

729,751,400 
674,866,639 
2,163,020,203 

$87,277,262 
80,314,189 
63,562,215 
1,032,985,395 
192,041,402 
161,279,298 

447,488,729 
291,003,421 
247,038,877 

2,145,393,637 
676,896,364 
473,402,700 
429,589,039 
356,629,923 

320,315,580 
282,536,401 
481,443,865 
93,977,520 
55,917,277 
88,937,396 
517,350,932 

4,272,383 

New  Hampshire  

$60,035,603 

Massachusetts  
Rhode  Island  
Connecticut  

553,378,770 

Middle  Atlantic 
New  York 

"97!i48!398 

New  Jersey  

East  North  Central 
Ohio 

Indiana    

"22i;769;986 
238,867,225 
386,581,000 

'     72!6iii293 
191,230,110 

'si,'  i97]  952 
55,384,866 
431,209,399 

""84;682;942 

"isi  1689;  857 
295,028,419 
121,098,098 
43,359,299 
138,021,114 
34,279,204 

189,130,112 
99,675,906 

"'66,'i6i!652 

Illinois               

Wisconsin      

West  North  Central 
Minnesota     

Missouri      

North  Dakota  
South  Dakota  
Nebraska        

South  Atlantic 

District  of  Columbia  .  . 

29,609,766 
194,948,218 
239,236,606 
243,626,571 
96,119,406 
273,007,557 
38,407,759 

205,269,010 
78,458,470 
224,159,047 
111,344,966 

128,644,208 
119,595,699 
214,142,358 
527,552,200 

98,176,389 

West  Virginia  
North  Carolina  
South  Carolina  

Georgia                

Florida  

East  South  Central 
Kentucky  
Tennessee    

Mississippi  
West  South  Central 

62,472,679 
259,810,049 
354,959,469 

68,481,299 
34,980,620 
51,513,534 
61,011,609 
20,771,379 
31,938,240 
43,470,332 

Texas  

Mountain 
Montana  
Idaho 

Wyoming  
Colorado       

47,966,596 
80,551,892 
17,003,648 
24,071,906 
47,203,027 
17,419,557 

117,949,520 
118,228,542 
313,534,205 

New  Mexico  
Arizona    

Utah                  

Pacific 
Washington  

157,385,331 
111,916,498 
444,723,043 

Oregon       

California.. 

*  Abstract  of  Special  Bulletins,  Wealth,  Debt  and  Taxation,  1913,  page  16. 


242 


STATE  OF  NEW  YORK 


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JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


243 


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244 


STATE  OF  NEW  YOKK 


APPENDIX  A  II  1 

TABLE  SHOWING  THE  ASSESSED  VALUATION  OF  KEAL  AND  PER- 
SONAL PROPERTY  AND  THE  AGGREGATE  STATE  AND  LOCAL 
TAXES  FROM  1840  TO  1914,  INCLUSIVE  * 


YEAR 

Real 

Personal 
including 
bank  stock 

Aggregate 
taxes  levied 

1840 

$517,723,170 

$121  447  830 

$3  088  408  22 

1841          

531  987  886 

123  311  644 

3  173  355  97 

1842     

504,254,029 

116  595  233 

4  246  487  78 

1843    

476,999,430 

118,602,064 

3  965  180  14 

1844       

480,027,609 

119  612  343 

4  243  101  81 

1845          

486,490,121 

117  988  895 

4  170  527  95 

1846     

496,483,411 

119,880  236 

4  647  461  88 

1847    

509,496,855 

121,162,201 

4  843  575  60 

1848     

526,624,853 

125,663  318 

5  295  458  23 

1849            

536,162,901 

129  926  625 

5  548  981  28 

1850     

571,690,807 

153,183,486 

6  312  787  33 

1851  

888,237,812 

196,538,263 

6  759  438  26 

1852    

946,467,907 

221,802,950 

7  007  688  08 

1853          

,015,762,791 

249  720  727 

9  326  763  97 

1854     

,091,514,033 

272,638,110 

9  638  279  63 

1855        

,107,272,715 

294  012  564 

11  678  015  69 

1856     

,112,133,136 

316,506,930 

12  743  179  73 

1857       

,111,551,629 

319,897  155 

15  166  309  62 

1858     

,095,403,134 

307,049,165 

15  426  593  20 

1859       

,098,666,251 

315,108,117 

16  353  301  38 

I860    

,119,933,484 

320,617,352 

18,956  024  50 

1861       

,121,134,480 

313,802,682 

20  402  276  51 

1862    

,113,779,352 

314,111,034 

19,456  288  40 

1863       

,161,750,000 

339  ,  249  ,  877 

23  046  800  66 

1864    

,158,327,371 

392,552,314 

39,873,945  56 

1865     

,196,403,416 

334,826,220 

45  961  440  62 

1866    

,237,703,092 

426,404,633 

40,568,244  69 

1867      

,327,403,886 

438,685,254 

46  518  921  62 

1868    

,418,132,855 

441,987,915 

44,298,435  90 

1869      

,532,720,907 

434,280,278 

46  161  531  50 

1870    

,599,930,166 

452,607,732 

50,328,684  21 

1871       

,641,379,410 

447,248,035 

45,674  486  92 

1872          

1,692,523,071 

437,102,215 

63  511  936  12 

1873       

1,750,698,918 

418,608,955 

51,444  536  27 

1874        

1,960,352,703 

407,427,399 

57  811  381  92 

1875     

2,108,325,872 

357,941,401 

56,926  470  69 

1876        

2,376,252,178 

379,488,140 

52  148  368  37 

1877     

2,373,408,540 

364,960,110 

50,237,164  06 

1878        

2,333,669,813 

352,469,320 

48  047  241  97 

1879                   •  •  •  •• 

2,315,400,526 

322,468,712 

47  148  475  04 

1880   

2,340,335,690 

340,921,916 

49,117,782  18 

1881     

2,432,661,378 

351,021,189 

49,286,772  55 

1882        

2,557,218,240 

315,039,085 

47,573  820  07 

1883     

2,669,173,011 

345,418,361 

50,936,788  95 

1884        

2,762,348,218 

332,383,239 

52,372,707  00 

1885     

2,899,899,062 

324,783,281 

57,265,650  02 

1886       

3,035,229,788 

335,898,389 

58,110,078  96 

1887    

3,122,588,084 

346,611,861 

57,331,191  58 

1888       

3,213,171,201 

354,258,556 

60,639,806  72 

1889    

3,298,323,931 

385,329,131 

60,183,803  78 

1890        

3,397,234,679 

382,159,067 

60,624,473  09 

1891    

3,526,645,815 

405,095,684 

60,417,409  52 

1892      

3,626,645,093 

491,675,158 

63,795,261  80 

1893   

3,761,679,384 

540,708,935 

67,274,029  22 

1894       

3,841,582,748 

562,193,379 

66,977,889  35 

1895   

3,908,853,377 

541,621,122 

72,400,944  11 

1896      

4,041,826,586 

544,311,557 

79,193,647  07 

1897            

4,349,801,526 

649,364,694 

80,645,206  34 

1898     

4,413,848,496 

758,581,839 

63,950,072  98 

1899         

4,811,593,039 

742,959,229 

102,940,006  33 

1900   

5,093,025,771 

672,715,703 

100,099,372  77 

1901     

5,169,308,069 

960,152,352 

105,656,212  21 

1902                    

5,297,754,482 

926,871,017 

104,107,361  08 

1903     

6,749,509,958 

1,152,169,443 

94,989,856  45 

1904                   

7,051,455,025 

1,104,370,798 

103,676,463  63 

1905     

7,312,621,452 

1,172,456,705 

106,441,726  08 

1906            

7,933,057,917 

1,069,967,682 

111,340,919  44 

*  Report  of  the  N.  Y.  State  Board^of  Tax  Commissioners,  1914,  pp.  53-54. 


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245 


APPENDIX  A  II  2 

TABLE  SHOWING  AMOUNT  OF  MONEY  RECEIVED  DIRECTLY  AND 
INDIRECTLY  FOR  STATE  PURPOSES  * 


YEAR 

Direct  State 
tax  levied 
for  State 
purposes 

Receipts 
from  indirect 
sources  for 
State  purposes 

1867  .  . 

$12  647,218  71 

1868  

10,243,317  01 

1869  

10,463,179  33 

1870.  . 

14,285,976  55 

1871 

11  613  943  51 

1872 

19,850,882  30 

1873  .  .  . 

14,800,903  38 

1874  

15,727,482  08 

1875  

14,206,680  61 

1876  

8,529,174  32 

1877 

8,726,511  01 

1878. 

7,941,297  94 

1879.  .  . 

7,690,416  34 

1880  

9,232,543  33 

1881  

6,032,826  31 

1882  

6,820,023  29 

1883 

9,334,886  31 

1884 

7,762,572  78 

1885.  . 

9,160,405  11 

1886  .  .  . 

9,512,812  91 

1887  

9,075,046  81 

1888  

9,089,303  85 

1889  

12,557,352  74 

1890.  .  . 

8,619,748  17 

$3,237,575  31 

1891  .  . 

5,196,666  40 

5,593,968  69 

1892. 

7,784,848  16 

4,797,209  73 

1893.  .. 

10,418,192  08 

5,887,706  55 

1894  

9,600,231  79 

4,817,250  80 

1895  

13,906,346  22 

5,411,654  50 

1896.  . 

11,751,837  71 

9,262,884  89 

1897.. 

12,033,651  80 

9,204,395  44 

1898 

10,189,110  93 

9,749,688  52 

1899.    . 

12,640,228  09 

10,463,265  71 

1900.  .  . 

10,704,153  39 

13,226,849  80 

1901  

6,824,306  01 

15,611,498  62 

1902  

748,072  05 

16,051,353  90 

1903 

761,085  02 

22,341,802  97 

1904 

968,041  89 

23,473,046  23 

1905                                                   

1,191,677  51 

23,869,423  44 

1906.  .  .                                      

32,077,393  48 

1907  

34,474,999  76 

1908 

33,253,796  17 

1909 

30,828,532  08 

1910 

37,130,151  19 

1911                                            

6,072,766  48 

35,400,611  10 

1912...                                   

11,022,986  91 

43,707,582  95 

1913  

6,460,093  12 

43,971,846  54 

1914 

42,588,417  81 

*  Report  of  the  State  Board  of  Tax  Commissioners  1914  (N.  Y.)  p.  54 


246 


STATE  OF  NEW  YORK 


APPENDIX  A  II  3 

RATIO   OF   PERCENTAGES    USED   IN    STATE   EQUALIZATION    TABLES 
EROM  1896  TO  1915  * 


COUNTIES 

Ratio? 
of  per- 
cent- 
age, 
1896 

Ratio 
of  per- 
cent- 
age, 
1897 

Ratio 
of  per- 
cent- 
age, 
1898 

Ratio 
of  per- 
cent- 

Ratio 
of  per- 
cent- 

Ratio 
of  per- 
cent- 
age, 
1901 

Ratio 
of  per- 
cent- 
age, 
1902 

Ratio 
of  per- 
cent- 
age, 
1903 

Ratio 
of  per- 
cent- 
age, 
1904 

Ratio 
of  per- 
cent- 
age, 
1905 

.75 
.70 

.75 
.70 

.78 
.73 

.78 
.73 

.78 
.73 

.78 
.73 

.80 
.75 

.80 
.75 

.80 
.75 

.81 
.75 

Allegany             

Broome  

.73 

.70 
.69 
.68 
.68 
.73 
.66 
.67 
.55 
.60 
.71 
.70 
.78 
.70 
.60 
.60 
.72 
.92 
.58 
.80 
.68 
.60 
.70 
.67 
.70 
.70 

.73 
.73 

.69 
.69 
.69 
.73 
.60 
.72 
.55 
.70 
.71 
.70 
.82 
.70 
.60 
.63 
.72 
.92 
.58 
.83 
.68 
.60 
.70 
.67 
.70 
.70 

.73 
.80 
.74 
.90 
.70 
.73 
.60 
.78 
.80 
.76 
.72 
.70 
.83 
.75 
.73 
.71 
.73 
.92 
.93 
.83 
.68 
.80 
.70 
.70 
.80 
.70 

.74 
.78 
.74 
.90 
.70 
.73 
.55 
.78 
.82 
.75 
.71 
.69 
.81 
.74 
.73 
.71 
.72 
.90 
.91 
.83 
.68 
.79 
.70 
.68 
.80 
.72 
.65 
.64 
.81 
.81 
.85 
.75 
.67 
.77 
.73 
.73 
.77 
.80 
.78 
.63 
.81 
.85 
.70 
.70 
.80 
.72 
.76 
.80 
.82 
.74 
.75 
.77 
.75 
.80 
.75 
.69 
.90 
.72 
.80 

.74 
.78 
.74 
.90 
.70 
.73 
.52 
.78 
.82 
.75 
.71 
.68 
.81 
.74 
.73 
.71 
.72 
.90 
.91 
.83 
.68 
.79 
.70 
.68 
.80 
.72 
.65 
.67 
.81 
.81 
.85 
.75 
.67 
.77 
.73 
.73 
.77 
.80 
.78 
.66 
.81 
.85 
.70 
.70 
.80 
.72 
.76 
.80 
.82 
.74 
.75 
.77 
.75 
.80 
.75 
.69 
.90 
.72 
.73 

.74 
.78 
.74 
.90 
.70 
.73 
.50 
.78 
.82 
.75 
.71 
.68 
.81 
.74 
.73 
.71 
.72 
.90 
.91 
.83 
.68 
.79 
.70 
.68 
.80 
.72 
.65 
.67 
.81 
.82 
.85 
.75 
.67 
.77 
.73 
.73 
.77 
.80 
.78 
.67 
.81 
.85 
.69 
.70 
.80 
.72 
.76 
.80 
.82 
.74 
.75 
.77 
.75 
.80 
.75 
.69 
.90 
.72 
.73 

.74 

.78 
.74 
.90 
.70 
.73 
.50 
.78 
.82 
.75 
.72 
.67 
.81 
.74 
.73 
.71 
.72 
.88 
.91 
.83 
.68 
.79 
.72 
.68 
.80 
.72 
.65 
.67 
.81 
.82 
.85 
.75 
.67 
.77 
.73 
.73 
.77 
.80 
.78 
.70 
.81 
.85 
.69 
.70 
.80 
.72 
.76 
.80 
.82 
.74 
.77 
.78 
.75 
.80 
.75 
.69 
.90 
.74 
.73 

.74 

.78 
.74 
.90 
.70 
.73 
.50 
.78 
.82 
.74 
.72 
.67 
.79 
.74 
.70 
.71 
.72 
.83 
.90 
.83 
.68 
.79 
.72 
.68 
.80 
.71 
.62 
.67 
.81 
.80 
.84 
.75 
.68 
.77 
.73 
.73 
.77 
.81 
.78 
.75 
.80 
.85 
.68 
.70 
.78 
.72 
.76 
.80 
.80 
.74 
.77 
.78 
.75 
.80 
.75 
.69 
.90 
.74 
.73 

.74 
.78 
.74 
.90 
.70 
.73 
.50 
.78 
.82 
.74 
.72 
.69 
.79 
.74 
.70 
.71 
.72 
.83 
.90 
.84 
.89 
.79 
.72 
.68 
.79 
.71 
.62 
.89 
.81 
.80 
.83 
.75 
.70 
.77 
.73 
.73 
.77 
.89 
.78 
.90 
.80 
.85 
.68 
.70 
.78 
.72 
.76 
.80 
.80 
.74 
.77 
.78 
.75 
.82 
.75 
.69 
.90 
.74 
.73 

.74 
.78 
.74 
.90 
.70 
.73 
.50 
.78 
.82 
.74 
.73 
.70 
.79 
.74 
.70 
.71 
.72 
.81 
.90 
.84 
.89 
.77 
.74 
.68 
.79 
.71 
.52 
.89 
.81 
.79 
.85 
.76 
.70 
.77 
.71 
.73 
.77 
.89 
.79 
.90 
.79 
.85 
.68 
.70 
.78 
.72 
.76 
.80 
.80 
.69 
.77 
.78 
.75 
.80 
.75 
.69 
.90 
.74 
.73 

Cattaraugus 

Cayuga  

Chautauqua  
Chemung  

Chenango               

Columbia           

Cortland 

Delaware          

Dutchess 

Erie  

Essex                          .    . 

Fulton                

Greene                    

Herkinaer           

Kings 

Livingston      

Madison 

Monroe  

Montgomery  

New  York 

.63 
.75 
.60 
.85 
.78 
.62 
.78 
.71 
.59 
.72 
.50 
.80 
.50 
.58 
.84 
.60 
.69 
.80 
.65 
.79 
.80 
.62 
.70 
.75 
.55 
.71 
.80 
.75 
.71 
.51 
.65 
.65 

.63 
.75 
.60 
.85 
.78 
.66 
.80 
.71 
.62 
.72 
.65 
.80 
.50 
.58 
.84 
.60 
.70 
.80 
.70 
.79 
.80 
.55 
.70 
.75 
.55 
.71 
.80 
.75 
.71 
.51 
.70 
.70 

.63 
.83 
.86 
.85 
.75 
.67 
.77 
.73 
.70 
.80 
.80 
.79 
.62 
.85 
.85 
.70 
.70 
.80 
.72 
.77 
.80 
.90 
.75 
.75 
.75 
.75 
.80 
.75 
.71 
.90 
.70 
.73 

Niagara  

Oneida                        .    . 

Ontario               .... 

Orleans  

Otsego            

Queens   

Richmond  

Rockland 

Saint  Lawrence  
Saratoga 

Schenectady  
Schoharie 

Schuyler  

Seneca  

Steuben 

Suffolk  . 

Sullivan 

Tioga  

Tompkins 

Ulster  

Warren  

Washington  

Wayne  

Westchester 

Yates       :::  

*  Ratio  of  percentages  adopted  for  Equalization  Tables  are  based  upon  Assessments  of  previous 
years. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 
APPENDIX  A  II  3  —  Concluded 


247 


COUNTIES 

Ratio 
of  per- 
cent- 
age, 
1906 

Ratio 
of  per- 
cent- 
age, 
1907 

Ratio 
of  per- 
cent- 
age, 
1908 

Ratio 
of  per- 
cent- 
age, 
1909 

Ratio 
of  per- 
cent- 
age, 
1910 

Ratio 
of  per- 
cent- 
age, 
1911 

Ratio 
of  per- 
cent- 
age, 
1912 

Ratio 
of  per- 
cent- 
age, 
1913 

Ratio 
of  per- 
cent- 
age, 
1914 

Ratio 
of  per- 
cent- 
age, 
1915 

Albany  

.85 
.75 

.85 
.75 

.90 
.75 

.90 
.75 

.90 

.75 

.90 

.75 

.90 

.72 

.90 
.70 

.90 
.65 
.91 
.83 
.70 
.75 
.74 
.76 
.74 
.50 
.80 
.80 
.58 
.80 
.77 
.56 
.60 
.68 
.72 
.70 
.70 
.66 
.80 
.91 
.71 
.75 
.80 
.75 
.75 
.55 
.91 
.70 
.75 
.82 
.71 
.62 
.61 
.80 
.77 
.75 
.89 
.86 
.89 
.61 
.77 
.72 
.82 
.80 
.65 
.77 
.75 
.62 
.45 
.80 
.80 
.75 
.50 
.78 
.72 
.81 
.70 
.71 

.87 
.70 
.92 
.83 
.70 
.75 
.72 
.77 
.72 
.50 
.78 
.77 
.58 
.80 
.75 
.58 
.60 
.65 
.74 
.65 
.65 
.70 
.80 
.92 
.71 
.75 
.80 
.78 
.70 
.52 
.93 
.68 
.75 
.82 
.73 
.60 
.80 
.79 
.77 
.71 
.89 
.89 
.89 
.68 
.77 
.68 
.75 
.77 
.65 
.77 
.75 
.65 
.40 
.80 
.77 
.73 
.60 
.78 
.75 
.75 
.74 
.71 

Bronx      

.78 
.78 
.76 
.90 
.73 
.73 
.50 
.80 
.84 
.74 
.80 
.72 
.80 
.76 
.71 
.72 
.72 
.81 
.90 
.84 
.89 
.77 
.78 
.76 
.80 
.75 
.62 
.89 
.81 
.81 
.88 
.76 
.70 
.77 
.80 
.76 
.79 
.89 
.79 
.90 
.79 
.85 
.68 
.73 
.78 
.72 
.80 
.80 
.80 
.69 
.85 
.78 
.75 
.80 
.75 
.72 
.90 
.76 
.77 

.78 
.78 
.76 
.90 
.73 
.73 
.50 
.60 
.84 
.68 
.85 
.74 
.60 
.65 
.75 
.72 
.72 
.85 
.90 
.84 
.89 
.77 
.82 
.76 
.82 
.75 
.62 
.89 
.81 
.81 
.88 
.76 
.70 
.77 
.80 
.75 
.79 
.89 
.79 
.90 
.79 
.85 
.68 
.78 
.79 
.74 
.80 
.80 
.75 
.60 
.85 
.78 
.83 
.67 
.73 
.72 
.90 
.76 
.77 

.78 
.78 
.78 
.90 
.73 
.73 
.55 
.84 
.86 
.68 
.85 
.76 
.60 
.65 
.75 
.77 
.72 
.85 
.90 
.84 
.89 
.77 
.82 
.85 
.85 
.77 
.62 
.89 
.81 
.81 
.88 
.76 
.75 
.77 
.84 
.75 
.79 
.89 
.83 
.90 
.79 
.85 
.68 
.78 
.82 
.74 
.85 
.80 
.75 
.60 
.85 
.83 
.83 
.67 
.73 
.75 
.90 
.76 
.80 

.78 
.78 
.78 
.85 
.73 
'.77 
.55 
.84 
.86 
.68 
.85 
.76 
.62 
.65 
.75 
.77 
.74 
.75 
.90 
.84 
.89 
.77 
.82 
.85 
.85 
.77 
.65 
.89 
.81 
.81 
.88 
.76 
.75 
.77 
.84 
.77 
.79 
.87 
.85 
.88 
.80 
.85 
.70 
.78 
.85 
.75 
.85 
.82 
.70 
.60 
.85 
.83 
.83 
.65 
.78 
.75 
.90 
.76 
.80 

.80 
.78 
.78 
.80 
.74 
.77 
.55 
.84 
.82 
.68 
.85 
.76 
.62 
.65 
.75 
.77 
.74 
.75 
.85 
.80 
.89 
.77 
.82 
.83 
.85 
.77 
.65 
.89 
.75 
.81 
.88 
.76 
.72 
.74 
.81 
.77 
.79 
.87 
.85 
.88 
.80 
.80 
.75 
.78 
.85 
.75 
.82 
.82 
.70 
.60 
.82 
.83 
.83 
.65 
.78 
.75 
.85 
.76 
.80 

.83 
.74 

.78 
.80 
.74 
.74 
.55 
.84 
.82 
.68 
.85 
.80 
.62 
.65 
.75 
.77 
.70 
.75 
.85 
.80 
.91 
.77 
.82 
.83 
.85 
.77 
.65 
.91 
.75 
.81 
.88 
.76 
.75 
.74 
.81 
.77 
.79 
.89 
.90 
.89 
.88 
.80 
.75 
.82 
.80 
.70 
.82 
.82 
.70 
.55 
.82 
.83 
.80 
.60 
.78 
.75 
.85 
.76 
.80 

.83 
.74 
.78 
.80 
.76 
.74 
.55 
.82 
.82 
.68 
.85 
.80 
.62 
.65 
.75 
.75 
.70 
.75 
.82 
.80 
.91 
.77 
.82 
.83 
.85 
.75 
.65 
.91 
.75 
.81 
.88 
.76 
.70 
.74 
.80 
.77 
.79 
.89 
.90 
.89 
.88 
.80 
.75 
.82 
.80 
.70 
.82 
.82 
.70 
.55 
.82 
.80 
.80 
.60 
.78 
.75 
.85 
.74 
.75 

.83 
.70 
.78 
.77 
.76 
.74 
.50 
.82 
.82 
.62 
.82 
.80 
.60 
.62 
.70 
.75 
.70 
.75 
.64 
.80 
.91 
.75 
.78 
.83 
.80 
.75 
.60 
.91 
.75 
.81 
.85 
.76 
.70 
.70 
.80 
.77 
.79 
.89 
.90 
.89 
.88 
.80 
.75 
.82 
.80 
.70 
.82 
.80 
.67 
.50 
.82 
.80 
.80 
.55 
.78 
.75 
.85 
.74 
.75 

Cayuga  

Chenango  

Clinton                    

Cortland         

Dutchess 

Erie                 

Essex 

Franklin   

Fulton                 

Greene  

Herkimer    

Lewis             

Nassau        

New  York            

Oneida            

Ontario  

Oswego  

Richmond  

Saratoga       

Schoharie  

Schuyler   

Steuben  

Suffolk 

Sullivan  

Tioga.             

Ulster  

Warren       

Washington  

Wayne        

Westchester 

Wyoming  , 

Yates 

248 


STATE  OF  NEW  YORK 


APPENDIX  A  IV  1 

STATEMENT  OF  PERCENTAGE  OF  PERSONAL  TO  TOTAL  ASSESSMENT 
FOR  THE  YEARS  1840,  1845,  1850,  1855,  1860,  1866,  1870, 
1875,  1880,  1885,  1890,  1895,  AND  1900  * 


COUNTIES 

Percentage  of  1 
personal  to 
total,  1840 

|i 

Percentage  of 
personal  to 
total,  1850 

Percentage  of 
personal  to 
total,  1855 

Percentage  of 
personal  to 
total,  1860 

•ss 

IS* 

Percentage  of 
personal  to 
total,  1870 

Percentage  of 
personal  to 
total,  1875 

Percentage  of 
personal  to 
total,  1880 

Percentage  of 
personal  to 
total,  1885 

Percentage  of 
personal  to 
total,  1890 

Percentage  of 
personal  to 
total,  1895 

Percentage  of 
personal  to 
total,  1900  N 

Albany  
Allegany  
Broome  
Cattaraugus... 
Cayuga.  . 

26.36 
3.48 
17.23 
4.03 
12.37 

25.29 
2.51 
10.07 
2.50 
13.57 

21.44 
5.90 
9.74 
4.44 
16.20 

19.40 
7.52 
12.53 
5.56 
14.75 

21.17 
9.55 
11.76 
6.62 
18.90 

19.39 
10.09 
13.00 
8.52 
21.41 

16.34 
9.80 
10.34 

7.42 
19  99 

10.25 
7.05 
7.29 
8.08 
12  18 

7.37 
7.75 
6.87 
8.82 
10  32 

8.09 
8.35 
10.09 
7.83 
10  89 

7.46 
8.25 
8.56 
9.40 
12  39 

8.34 
10.48 
8.27 
9.11 
11  45 

9.39 
12.09 
8.46 
8.61 
9  21 

Chautauqua... 
Chemung  
Chenango  
Clinton.  
Columbia 

6.99 
12.20 
12.97 
15.91 
26  36 

7.30 
9.85 
11.86 
4.48 
25  14 

11.86 
13.37 
13.09 
3.68 

OQ    OK 

11.77 
14.55 
15.73 
10.75 
29.33 

12.64 
13.82 
14.62 
12.08 
30.86 

15.89 
18.90 
15.59 
15.33 
24  35 

11.62 
12.36 
12.66 
12.86 
20  22 

8.47 
8.63 
11.11 
11.80 
29  36 

10.54 
3.63 
14.18 
11.30 
17  95 

9.53 
5.44 
11.07 
12.52 
16  26 

9.20 
8.54 
10.50 
10.96 
13  42 

fc8.76 
7.10 
10.16 
10.20 
12  27 

7.69 
5.37 
12.54 
10.89 
11  02 

Cortland  
Delaware 

10.90 
11.27 

6.63 
9  36 

8.54 
17  43 

9.02 
13.26 

10.15 
13.52 

15.19 
16.71 

12.16 
13.18 

9.75 
13  54 

11.91 
12  34 

10.98 
10  94 

9.52 
10  59 

8.11 
9  55 

9.73 
11  21 

Dutchess  
Erie. 

26.72 
8.49 

26.67 
4.79 

26.03 
9  15 

25.95 
13.54 

26.77 
12.70 

28.48 
18.43 

27.25 
15.82 

18.18 
10.97 

16.15 

7  99 

14.88 
7  28 

16.27 
6  55 

11.27 
5  95 

12.17 
4  16 

Essex  
Franklin  
Fulton  
Genesee  
Greene  

10.49 
2.01 
18.39 
5.64 
18.20 

5.82 
10.13 
14.77 
7.53 
19.92 

14.42 
8.78 
17.12 
11.38 
24.36 

11.93 
8.37 
16.87 
11.41 
16.84 

10.65 
9.22 
14.08 
14.75 
17.57 

9.85 
13.66 
16.85 
17.19 
19.27 

9.16 
12.94 
13.40 
15.72 
17.28 

7.43 
12.09 
11.72 
14.93 
11.37 

6.49 
14.07 
9.60 
14.75 
9.92 

7.13 
14.38 
6.99 
12.39 
12.62 

7.06 
11.58 
8.03 
12.32 
10.12 

7.75 
10.17 
7.74 
11.64 
10.26 

8.33 
10.15 
11.21 
13.08 
11.22 

Hamilton  
Herkimer  
Jefferson  
Kings 

.35 
14.91 
8.82 
12  25 

.13 
12.63 
12.21 
13.13 

1.14 
13.99 
15.43 
11.23 

.93 
18.08 
18.86 
11  31 

.79 
20.68 
18.76 
11.20 

2.07 
16.55 
17.67 
16.47 

2.02 
15.70 
18.36 
9.24 

.44 
12.38 
17.10 
7  36 

.17 

10.77 
12.73 
4  82 

.14 

9.87 
10.94 
S3  46 

.37 
10.22 
9.57 
3  14 

.10 
9.25 
11.40 
14  18 

.69 
10.19 
10.94 
6  31 

Lewis  
Livingston  
Madison  
Monroe 

11.85 
6.94 
11.09 
8  91 

13.35 
9.34 
10.78 
10.65 

6.96 
12.57 
14.45 
11  12 

12.25 
13.12 
16.94 
11.28 

11.81 
16.62 
20.02 
15.95 

10.08 
14.82 
22.01 
16.08 

10.06 
14.61 
16.11 
10.61 

10.51 
8.99 
13.75 
5.53 

11.02 
10.22 
12.24 
4  44 

fS.98 
10.31 
10.21 
5  17 

7.88 
11.42 
9.10 
5  84 

17.82 
12.07 
8.07 
5  34 

12.14 
11.15 

9.74 
6  93 

Montgomery.  .  . 
Nassau  

11.83 

10.26 

12.15 

11.37 

7.56 

13.47 

7.93 

5.42 

7.03 

6.14 

10.70 

11.24 

10.93 
6  93 

New  York  
Niagara  
Oneida 

25.78 
3.49 
18  36 

26.16 
6.77 
19  66 

27.58 
7.57 
22  97 

30.80 
8.48 
17  71 

30.95 
14.51 
18  15 

35.00 
15.14 
14  14 

29.14 
13.55 
12  93 

19.73 
6.99 
11  10 

17.59 
6.59 
10  51 

14.78 
7.30 
9  39 

13.61 
8.09 
8  65 

i8.  39 
7.71 
9  16 

15.35 
5.01 
19  10 

Onondaga  
Ontario  
Orange  
Orleans 

11.86 
14.20 
18.01 
5  30 

11.28 
13.67 
19.89 
7.73 

11.68 
16.96 
21.56 
10  58 

14.62 
16.19 
23.61 
12.10 

13.32 
19.65 
23.83 
11.43 

14.83 
19.08 
27.94 
10.34 

13.55 
19.46 
24.50 
10.84 

10.90 
11.58 
20.94 
7.21 

10.62 
10.85 
15.79 
9  73 

8.98 
11.06 
14.13 
10  24 

8.03 
10.75 
12.06 
9  35 

6.36 
10.19 
10.70 

8  78 

9.13 
10.16 
9.92 
9  97 

Oswego  
Otsego 

9.82 
15  79 

6.95 
13  64 

10.10 
16.68 

9.94 
19.23 

13.03 

18.91 

16.00 
18.22 

10.53 
14.54 

9.64 
11.60 

5.54 
12  46 

3.81 
10  29 

5.96 
9  77 

5.62 
10  28 

11.91 
12  96 

Putnam  
Queens  
Rensselaer  
Richmond  
Rockland  
Saint  Lawrence 
Saratoga  
Schenectady  .  .  . 
Schoharie... 
Schuyler  
Seneca  
Steuben  
Suffolk  
Sullivan  
Tioga  
Tompkins  
Ulster  
Warren  
Washington.... 
Wayne    

16.38 
29.51 
27.88 
13.69 
19.23 
2.67 
16.28 
24.64 
8.08 

n.ii 

5.41 
19.09 
5.46 
17.04 
21.29 
16.15 
3.74 
16.58 
7  62 

15.37 
30.32 
29.92 
13.24 
21.57 
9.53 
15.95 
18.28 
8.70 

6^87 
20.29 
4.49 
15.67 
17.53 
14.80 
2.42 
13.40 
4  77 

21.97 
32.32 
29.74 
14.06 
20.65 
4.02 
19.03 
24.14 
16.35 

8^47 
20.44 
9.40 
17.15 
18.61 
16.25 
4.25 
17.13 
8  56 

16.09 
26.57 
26.41 
17.59 
16.43 
9.30 
20.01 
15.68 
12.91 
7.36 
14.40 
16.34 
22.78 
11.56 
13.73 
11.57 
14.53 
15.94 
17.59 
29  00 

19.46 
24.80 
27.64 
10.64 
18.45 
10.06 
23.53 
14.02 
14.02 
7.05 
15.22 
15.70 
19.32 
11.32 
16.07 
19.09 
15.82 
16.43 
20.39 
12  29 

27.92 
26.55 
21.40 
9.66 
24.67 
11.13 
22.60 
11.55 
12.65 
14.75 
15.04 
11.44 
19.16 
6.81 
20.06 
20.74 
24.07 
20.47 
20.29 
15  65 

22.26 
22.17 
26.41 
8.74 
17.85 
9.41 
22.57 
10.54 
12.06 
10.63 
13.94 
10.95 
18.32 
5.15 
12.94 
18.73 
17.97 
17.82 
20.61 
11  90 

17.12 
13.50 
18.23 
7.17 
9.79 
8.78 
12.32 
9.22 
11.55 
10.81 
12.29 
9.15 
15.81 
6.56 
7.71 
10.99 
14.38 
18.88 
17.99 
10.15 

18.08 
6.24 
14.45 
4.67 
20.35 
7.45 
8.44 
10.46 
10.96 
9.76 
11.83 
8.82 
13.00 
3.97 
6.66 
12.40 
13.96 
17.00 
13.71 
7  71 

18.32 
7.49 
12.59 
2.79 
11.31 
8.36 
7.12 
6.43 
11.11 
7.33 
12.27 
7.97 
11.79 
2.85 
6.66 
11.26 
11.58 
16.44 
13.36 
8  45 

13.47 
4.67 
10.20 
2.17 
9.20 
8.93 
7.28 
5.87 
11.37 
10.12 
12.28 
8.10 
10.89 
2.50 
7.20 
10.97 
10.10 
15.00 
11.92 
9  35 

11.44 
4.08 
9.17 
.64 
6.98 
8.23 
6.16 
8.35 
10.38 
8.91 
11.12 
7.66 
9.25 
2.41 
7.87 
8.60 
8.69 
20.05 
16.56 
8  80 

14.88 
5.00 
9.61 
12.78 
5.23 
9.87 
6.38 
8.98 
11.66 
9.38 
10.84 
7.40 
6.97 
4.37 
9.70 
11.61 
8.55 
19.18 
12.67 
8  54 

Westchester... 
Wyoming  

27.05 

30.33 
4  77 

38.84 
7  31 

17.56 
11  32 

16.57 
10  37 

16.16 
12  78 

14.46 
12.60 

9.93 
9.11 

6.42 
9  45 

4.96 
10  64 

3.52 
10  76 

3.03 
10  31 

8.79 
12  07 

Yates  

4.57 

7.59 

11.62 

10.48 

13.10 

13.36 

11.60 

10.41 

9.42 

9.49 

9.14 

8.45 

7.68 

State  

18.93 

19.48 

21.05 

20.95 

22.24 

25.50 

22.05 

14.86 

12.70 

10.98 

10.12 

12.16 

11.66 

*  Report  of  the  N.  Y.  State  Board  of  Tax  Commissioners,  1914,  pages  51-52. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


249 


APPENDIX  A  IV  1  —  Concluded 

STATEMENT  OF  PERCENTAGE  OF  PERSONAL  TO   TOTAL  ASSESS- 
MENT FOR  THE  YEARS  1913  TO  1914,  INCLUSIVE 


COUNTIES 

SScc 

Ps 
|t! 

•3S* 

|15 

§  2  3 
3*5 

}l! 

g£5 
I*2 

Percentage  ot 
personal  to 
total.  1906 

Percentage  of 
personal  to 
total,  1907 

Percentage  ot 
personal  to 
total,  1908 

Percentage  of 
personal  to 
total,  1909 

Percentage  of 
personal  to 
total,  1910 

•SB- 

|1| 

3»° 

Percentage  of 
personal  to 
total,  1912 

'S-Sc* 

||S 

ill 

N 

Percentage  of 
personal  to 
total,  1914  |j 

Albany 

7  87 

6.81 

6  15 

6  65 

5  65 

5  44 

5  42 

5  15 

4  30 

4  42 

5  71 

5  86 

Allegany  

8.25 

8.29 

7.55 

7.84 

6.62 

5.77 

5.221 

4.90 

4.14 

3.95 

3.68 

2.69 

Bronx  
Broome 

5  62 

'5.52 

4  93 

5.50 

5  ii 

4  75 

! 
'4  36! 

4  20 

3  JJl 

3  63 

2  92 

.86 
2  70 

Cattaraugus  

6.24 

6.09 

5.58 

6.03 

5.03 

4.49 

4.16 

3.57 

2.85 

11.21 

2.68 

2.16 

Cayuga 

6.97 

6.97 

6.40 

6.12 

5.23 

4.73 

4.32 

4.12 

3.47 

3  19 

2  98 

2  75 

5  57 

5  47 

5  28 

5  15 

4  71 

3  77 

3  26 

2  84 

2  54 

2  37 

2  35 

1  99 

Chemung  
Chenango  
Clinton 

2.81 
7.81 
15  96 

3.84 
7.70 
6.35 

4.28 
7.01 
5  89 

5.62 
6.93 
4  78 

5.28 
5.99 
5  08 

5.16 
5.47 
4  13 

4.79 
5.25 
3  64 

5.63 
4.64 
3  19 

5.28 
4.36 
2  87 

5.38 
4.00 
2  60 

3.26 
3.80 
2  46 

1.53 
3.50 
2  47 

Columbia  
Cortland  

'7.23 
5.66 
12  13 

6.97 
5.20 
12  21 

7.00 
4.61 
8  21 

7.19 
4.52 
8  66 

7.15 
3.78 
6  58 

5.85 
3.33 

5  89 

5.29 
3.08 
5  09 

4.53 
'  2.60 
4  25 

4.07 
2.19 
3  88 

3.72 
1.91 
3  38 

3.63 
1.87 
2  99 

3.34 
1.59 
2  75 

Dutchess  
Erie  
Essex  

8.89 
2.79 
8.49 

7.50 
2.97 
8.38 

7.93 

2.77 
5.36 

8.61 
2.61 
5.22 

8.52 
2.39 
4.53 

8.23 
2.30 
4.39 

8.46 
2.16 
4.19 

7.69 
2.15 
3.87 

6.26 
1.98 
3.58 

5.92 
1.90 
3.68 

5.60 
1.85 
3.34 

5.59 
1.90 
2.89 

Franklin  
Fulton 

6.43 
13  33 

6.14 
13.10 

5.94 
5  75 

5.83 
5  64 

5.15 
5  00 

4.41 
4  75 

4.24 
4  99 

3.79 
4  53 

3.68 
4.17 

3.49 
3  99 

3.06 
3.32 

2.75 
4  88 

Genesee  
Greene     .         .   . 

12.43 
6.88 

9.27 
6.44 

9.04 
6.18 

8.67 
5.58 

6.74 
5.15 

5.94 
4.71 

6.07 
4.23 

5.92 
3.82 

5.49 
3.44 

3.66 
3.06 

3.51 
2.83 

4.72 
2.49 

65 

55 

61 

53 

68 

49 

42 

19 

.16 

44 

.15 

16 

Herkimer  
Jefferson 

6.29 
8.40 

5.66 
7.99 

5.66 
7.38 

5.32 
6  78 

5.43 
5.89 

4.40 
5.29 

4.10 
4.86 

3.50 
4.44 

3.40 
4.20 

3.17 
4.41 

3.04 
4.22 

2.79 
4.11 

10  48 

8  94 

8  81 

7  56 

7  28 

5  88 

6  22 

4  05 

3  20 

2  82 

2  68 

2  29 

Lewis  
Livingston  . 

11.48 
8  83 

11.15 

8.92 

9.80 
8  73 

8.79 
8  52 

6.84 
7  72 

6.12 
7  36 

5.78 
7.02 

5.28 
6.49 

4.87 
6.00 

4.79 
5  62 

3.96 
5.44 

3.77 
5.10 

Madison  

6.91 

6.58 

6.35 

6.63 

5.81 

5.45 

5.26 

4.84 

4.77 

4.32 

3.96 

3.59 

Monroe  
Montgomery 

4.86 
5  82 

4.99 
5  68 

4.79 
5  12 

4.65 
4  72 

4.54 
4  37 

4.20 
3  76 

3.99 
3.25 

4.31 
2.90 

3.96 
2.73 

3.65 
2.28 

3.50 
2.37 

3.15 
2.51 

Nassau  

7.70 

7.48 

8.22 

10.97 

8.29 

7.62 

6.70 

3.59 

3.27 

2.74 

2.42 

2.24 

New  York     ... 

13.14 

11.72 

12.49 

9.44 

8.53 

6.32 

6.81 

5.51 

4.96 

4.81 

4.48 

5.29 

3  47 

3  44 

2  93 

3  17 

2  33 

1  95 

1  77 

1  87 

1  53 

1.42 

1.39 

1.22 

Oneida  
Onondaga 

10.51 
5.26 

12.03 
5  74 

8.78 
5  13 

9.03 
5  15 

9.15 
4.54 

9.29 
4  37 

9.46 

4.28 

9.06 
3.94 

7.84 
4.11 

7.65 
3.48 

7.70 
3.30 

7.20 
3.11 

Ontario  
Orange  
Orleans 

10.94 
6.25 

7  74 

9.27 
5.98 
7  13 

8.64 
6.67 
5  26 

8.23 
6.49 
5  11 

7.38 
5.75 
4  14 

6.92 
5.63 
3  33 

6.69 
5.33 

2.84 

6.20 
5.23 
2.66 

5.61 
4.97 
2.26 

5.13 
5.04 
1.86 

4.67 
4.65 
1.65 

6.12 
4.54 
1.23 

Oswego  
Otsego         

6.35 
9.06 

6.79 
9.39 

5.67 
9.14 

5.63 
8.99 

4.53 
8.08 

4.48 
7.67 

4.61 
7.01 

10.81 
6.40 

3.34 
5.98 

5.57 
5.35 

3.77 
5.07 

4.71 
4.83 

9  47 

9  21 

9  69 

8  39 

7  86 

8.36 

10  02 

9  57 

8.16 

7.17 

7.53 

6.53 

Queens  

7.59 

5.38 

6.08 

5.73 

4.89 

3.23 

3.13 

1.57 

1.18 

1.38 

1.39 

1.19 

Rensselaer  

5.84 
12  27 

5.63 
11  58 

5.46 
10  96 

5.47 
9  24 

5.16 
7.12 

5.03 

4.48 

4.80 
4.69 

4.80 
3.14 

4.33 
2.37 

3.97 
2.18 

3.88 
2.13 

3.86 
1.85 

Rockland  
Saint  Lawrence  
Saratoga 

3.44 
11.42 
4  24 

2.74 
8.16 
3  53 

2.99 
7.81 
3  26 

2.56 
7.86 
2  87 

2.67 
6.90 
2.47 

3.50 
6.38 
2.64 

2.60 
5.86 
2  54 

3.32 
5.36 
2.08 

2.17 
5.06 
1.91 

2.87 
5.01 
1.62 

2.67 
4.82 
1.32 

1.76 
4.34 
1.25 

Schenectady  
Schoharie  
Schuyler 

6.42 
11.86 
8  12 

7.42 
11.21 
7  61 

5.59 

7.68 
7  53 

5.00 
8.43 
6.87 

5.21 
6.55 
6.23 

4.76 
5.81 
5.85 

4.43 
5.41 
4.29 

4.29 
4.57 
3.57 

4.04 
4.51 
2.76 

4.42 
3.92 
2.45 

4.01 
3.46 
2.29 

3.70 
2.93 
2.09 

Seneca  
Steuben  
Suffolk  '  
Sullivan  

Tioga 

7.83 
6.46 
6.68 
2.93 
8.43 

7.18 
6.24 
6.32 
2.73 
8.04 

6.16 
5.69 
6.37 
2.53 
8.34 

6.15 
5.76 
5.86 
4.05 

7.84 

5.33 
5.0 
4.78 
1.93 
7.05 

4.72 
4.23 
4.29 
1.68 
6.41 

4.19 
4.08 
4.10 
1.45 
15.07 

3.97 
3.68 
3.53 
1.59 
4.07 

3.56 
3.90 
5.14 
1.69 
3.67 

3.13 
4.12 
3.30 
2.18 
3.25 

2.66 
3.33 
3.01 
2.15 
3.07 

2.54 
3.07 
2.26 
1.82 
2.76 

Tompkins  

8.02 

7.49 

7.24 

6.68 

5.82 

5.00 

4.44 

4.20 

4.82 

4.86 

4.65 

3.99 

Ulster  
Warren 

3.39 
13  96 

3.1 
13  63 

2.83 
13.71 

2.89 
10.89 

2.82 
9.3 

2.46 
5.39 

2.36 
4.93 

2.20 
4.61 

2.32 
4.16 

2.07 
3.94 

1.68 
3.69 

1.50 
2.73 

Washington  
Wayne  .  .         

8.52 
7.03 

8.10 
6.74 

8.00 
6.54 

7.55 
6.18 

6.84 
4.40 

6.32 
3.85 

5.84 
3.51 

5.43 
3.12 

5.18 
2.73 

5.05 
2.66 

4.62 
2.17 

3.46 
1.74 

Weetchester 

6  82 

6  0 

5.85 

5.12 

4.1 

3.82 

3.53 

2.98 

2.93 

2.76 

2.21 

2.01 

Wyoming  
Yates      . 

9.43 
8  58 

8.94 
7.1 

9.02 
8.22 

8.62 
6.92 

6.9 
5.44 

5.77 
4.87 

5.38 
4.58 

4.68 
4.76 

4.18 
4.55 

4.33 
4.70 

4.33 
4.63 

3.51 
3.63 

State  

10.82 

9.7 

10.04 

8.07 

7.3 

5.6S 

5.65 

4.76 

4.19 

4.01 

3.73 

3.77 

1  Report  of  N.  Y.  State  Board  of  Tax  Commissioners,  1914,  pp.  49-50. 


250 


STATE  OF  NEW  YORK 


APPENDIX  A  IV  2 

TOTAL  ASSESSED  VALUE  OF  PERSONAL  PROPERTY  AND  ASSESSED 
VALUE  OF  PERSONAL  PROPERTY  NOT  TAXABLE  LOCALLY  FOR 
STATE  PURPOSES,  1914  * 


COUNTIES 

Total  assessed 
value  of  personal 
property, 
1914 

Assessed  value 
of  personal 
property,  not 
taxable  locally 
for  State 
purposes,  1913 

Albany           

$15,535,573 

$7  112  237 

Allegany      

2,170,165 

1  581  656 

Broome 

3  021  108 

1  626  868 

Cattaraugus 

3  657  088 

2  879  600 

Cayuga 

2  414  094 

1  241  260 

Chautauo.ua 

4  141  603 

2  896  354 

Chemung 

1  743  950 

1  204  605 

Chenango 

2  229  284 

1  631  010 

Clinton 

1  435  485 

1  181  130 

Columbia 

2  314  499 

1  393  967 

Cortland                ... 

1  248  591 

973  596 

Delaware                  .           .    .           . 

1  977  678 

1  532  441 

Dutchess                   ....           

7  096  777 

3  186  327 

Erie                       

27  968  682 

20  051  456 

Essex                     

993,262 

550  160 

Franklin            

1,699,670 

1,332,910 

Fulton           

3,188,265 

2,342,492 

Genesee         

1,965,728 

575,000 

Greene           

1,084,666 

748,541 

Hamilton       

8,199 

Herkimer     

3,493,105 

2,488,655 

Jefferson     

3,621,202 

1,629,997 

Lewis         

710,190 

279,957 

Livingston 

2  078  081 

611  836 

Miadison 

1  544  808 

753,008 

IMonroe 

15  821  817 

6,977,492 

IVtontgomery 

3,120,755 

2,351,005 

Nassau 

4,394  545 

1,982,345 

New  York  (Greater) 

703,006,714 

362,711,154 

Niagara                                                   .... 

3,187,587 

2,252,982 

Oneida                              .                       

13,969,952 

7,656,711 

Onondaga                         .                       

11,452,925 

5,570,175 

Ontario                             .           

3,520,759 

1,184,759 

Orange                              .        

6,190,799 

3,623,189 

Orleans                 

1,032,997 

681,962 

Oswego                      

2,760,984 

1,100,989 

Otsego               

3,290,342 

2,059,017 

Putnam      

1,268,129 

309,529 

Rensselaer  

7,038,300 

3,694,650 

Rockland 

1,417,094 

820,622 

Saint  Lawrence 

4,314,935 

2,235,845 

Saratoga 

1,484,807 

1,125,452 

Schenectady                                                  .    .    . 

3,133,534 

631,642 

Schoharie.  . 

892,418 

538,001 

JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 
APPENDIX  A  IV  2  —  Concluded 


251 


COUNTIES 

Total  assessed 
value  of  personal 
property, 
1914 

Assessed  value 
of  personal 
property,  not 
taxable  locally 
for  State 
purposes,  1914 

Schuyler            

$315,611 

$171  651 

Seneca          

865,825 

427  100 

Steuben  

2,941,109 

1  559  799 

Suffolk 

4  427  854 

2  293  729 

SullivRn 

628  502 

500  689 

Tioga                            

1,201,814 

807  974 

Tompkins    

1,871,486 

1,012  886 

Ulster     

2,924,144 

2,421,074 

Warren 

1  894,593 

1  444  598 

Washington 

2,092,694 

1  358  669 

W^ayne                           .                .        

-   1,783,345 

1;201  880 

Westchester              

12,230,281 

4,211,609 

Wyoming         

1,408,551 

688,268 

Yates  

922,920 

484,390 

Total 

$924,149,875 

$485,987,900 

*  Report  of  the  New  York  State  Board  of  Tax  Commissioners,  1914,  page  547. 


252 


STATE  or  NEW  YORK 


APPENDIX  A  V  1 

TABLE  SHOWING  THE  PERCENTAGE  OF  TENTATIVE  PERSONAL 
PROPERTY  ASSESSMENT  RETAINED  ON  BOOK  IN  BOROUGHS  OF 
MANHATTAN,  BRONX,  BROOKLYN,  RICHMOND  AND  QUEENS, 
FROM  1907  TO  1914 

MANHATTAN  —  TAXES  OF  1907 


Tentative 
assessment  on 
annual  record 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Per  cent 
retained 
on  book 

Resident  corporations  . 

$1  171  685,000 

$1  118  643  620 

95  4 

$53  041,380 

4  5 

Nonresident  corporations  
Resident  personal 

219,152,500 
554  511,305 

192,044,325 
366  033  222 

87.6 
66  0 

27,108,175 
188  478  083 

12.3 
33  9 

Nonresident  personal  
Estates    . 

223,229,615 
356,505,905 

157,518,105 
258,190,895 

70.5 
72  4 

65,711,510 
98,315,010 

29.4 
27  5 

Totals  

$2,525,084,325 

$2,092  430,167 

82  8 

$432,654,158 

17  1 

MANHATTAN  —  TAXES  OF  1908 


Resident  corporations 

$133  829  525 

$79  871  030 

59  6 

$53  958  495 

40  3 

Nonresident  corporations  
Resident  personal 

58,723,800 
469  401  150 

31,745,000 
331  294  298 

54.0 
70  5 

26  ,978,  '800 
138  106  852 

S.1 

29  4 

Nonresident  personal  

Estates 

136,240,955 

287  984  880 

108,091,600 
212  808  255 

79.3 
73  8 

28,149,355 
75,176  625 

20.8 
26  1 

Tax  Law,  Sec.  7,  Subdv.  2  

34,152,150 

28,711,645 

84.0 

5,440,505 

15.9 

Totals 

$1  120  332  460 

$792  521  828 

70  7 

$327  810  632 

29  2 

MANHATTAN  —  TAXES  OF  1909 


Tentative 
assessment  on 
annual  record 

Additions 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Per  cent 
retained 
on  book 

Resident  corporations  
Nonresident  corporations.  .  . 
Resident  personal  
Nonresident  personal  
Estates  
Tax  Law,  Sec.  7,  Subdv.  2.. 

$135,443,200 
55,924,750 
370,695,507 
77,423,975 
278,962,905 
18,581,255 

$1,589,200 
108,275 
1,324,075 
136,615 
7,610,000 
383,000 

$70,467,325 
26,477,150 
241,373,523 
52,231,695 
211,360,570 
14,069,860 

51.4 
47.2 
64.8 
67.3 
73.7 
74.1 

$66,565,075 
29,555,875 
130,646,059 
25,328,895 
75,212,335 
4,894,395 

48.5 
52.7 
35.1 
32.6 
26.2 
25.8 

Totals  

$937,031,592 

—$11,151  165 

$615  980  123 

64  9 

$332  202  634 

35  0 

MANHATTAN  —  TAXES  OF  1910 


Resident  corporations .... 
Nonresident  corporations. . 

Resident  personal 

Nonresident  personal 

Estates 

Tax  Law,  Sec.  7,  Subdv.  2. 

Totals... 


$127,801,800 
47,218,600 
407,801.322 
86,024,045 
282,887,810 
7,252,895 

$522,650 
193,300 
166,810 
139,900 
962,367 

$56,797,250 
20,749,950 
291,311,331 
67,262,955 
223,408,430 
3,411,100 

44.2 
43.7 
71.4 
78.0 
78.7 
47.0 

$71,527,200 
26,661,950 
116,656,801 
18,900,990 
60,441,747 
3,841,795 

8: 

28.5 
21.9 
21.2 
52.9 

$958,986,472 

$1,985,027 

$662,941,016 

68.9 

$298,030,483 

31.0 

JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


253 


APPENDIX  AVI  —  Continued 

MANHATTAN  —  TAXES  OF  1911 


Tentative 
assessment  on 
annual  record 

Additions 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Percent 
retained 
on  book 

Resident  corporations  
Nonresident  corporations.  .  . 
Resident  personal  
Nonresident  personal  
Estates  
Tax  Law,  Sec.  7,  Subd.  2... 

Totals  

$118,129,600 
30,344,500 
299,469,091 
27,401,215 
178,368,250 
4,272,295 

$212,500 
74,400 
68,600 
16,000 
219,800 
2,000 

$43,720,500 
6,049,600 
182,202,944 
12,612,215 
122,896,040 
705,700 

37.0 
19.9 
60.8 
46.0 
68.9 
16.5 

$74,409,100 
24,294,900 
117,266,147 
14,789,000 
55,472,210 
3,566,595 

62.9 
80.0 
39.1 
53.9 
31.1 
83.4 

5657,984,951 

$593,300 

$368,186,999 

55.9     $289,797,952 

44.0 

MANHATTAN  —  TAXES  OF  1912 


Resident  corporations  
Nonresident  corporations..  . 
Resident  personal  
Nonresident  personal 

$124,989,300 
37,959,000 
267,603,527 
19,755,050 
135,804,695 
3,939,595 

$24,800 
106,000 
9,569,390 

$48,505,500 
12,188,450 
142,139,360 
6,005,030 
99,600,905 
144,800 

38.8 
32.1 
53.1 
30.3 
73.3 
3.6 

$76,483,800 
25,770,800 
125,464,167 
13,750,020 
36,203,790 
3,794,795 

61  1 
67.8 
46.8 
69.6 
26.6 
96.3 

Estates  
Tax  Law,  Sec.  7,  Subd.  2... 

Totals  

11,800 
348,000 

$590,051,167 

$10,059,990 

$308,584,045 

52.2 

$281,467,122 

47.7 

Resident  corporations  .... 
Nonresident  corporations.  . 
Resident  personal  
Nonresident  personal  
Estates  
Tax  Law,  Sec.  7,  Subd.  2.. 

Totals  

Resident  corporations  
Nonresident  corporations.  .  . 
Resident  personal 

MANE 

$145,944,000 
43,342,200 
302,902,280 
47,527,500 
154,064,500 
4,096,200 

[ATTAN  —  TA] 
$170,000 
22,200 
404,300 
4,300 
348,900 
27,000 

tES  OF  1913 
$55,367,700 
13,704,300 
201,162,945 
31,187,700 
130,430,000 
511,700 

37.9 
.31.6 
66.4 
65.6 
84,6 
12.4 

$90,576,300 
29,637,900 
101,739,335 
16,339,800 
23,634,500 
3,584,500 

62.0 
68.3 
33.5 
34.3 
15.3 
87.5 

$697,876,680 

$976,700 

$432,364,345 

61.9 

$265,512,335 

38.0 

MAN£ 
$153,216,900 
34,872,000 
260,727,120 
38,600.200 
131,308,700 
4,100,900 

[ATT  AN—  TA 
$76,400 
109,000 
271,200 
11.000 
556,400 
27,200 

XES  OF  1914 

$53,105,800 
8,458,700 
151,137,250 
20,030.200 
101,702,300 
623,300 

34.6  1 
24.2 
57.9 
51.8 

77.4 
15.1 

$100,111,100 
26,413,300 
109,589,870 
18,570,000 
29,606,400 
3,477,600 

65.3 

75.7 
42.0 
48.1 
22.5 
84.8 

Nonresident  personal  
Estates  ... 

Tax  Law,  Sec.  7,  Subd.  2... 
Totals.   .   .   . 

$622,825,820 

$1,051,200 

$335,057,550 

53.7 

$287,768,270 

46.2 

BRONX  —  TAXES  FOR  1907 

Tentative 
assessment  on 
annual  record 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Percent 
retained 
on  book 

Personal 

$29,611,697 
3,294,025 
36,347,450 

$17,875,473 
2,233,695 
35,028,305 

60.3 
67.8 
96.3 

$11,736,224 
1,060,330 
1,319,345 

39.6 
32.1 
3.6 

Estates  

Corporations                            < 

Total  

$69,253,172 

$55,137,473 

79.6 

$14,115,699 

20.3 

BR 

Resident  personal 

ONX  —  TAXES 

$24,518,688 
.  3,511,116 
3,932,790 

FOR  1908 

$15,553,540 
2,308,642 
2,560,730 

63.4 
65.7 
65.1 

$8,965,146 
1,202,474 
1,372,060 

36.5 
34.2 
34.8 

Estates  

Resident  corporations                               .   . 

Totals  

$31,962,592 

$20,422,912 

63.9 

$11,539,680 

36.1 

254 


STATE  OF  NEW  YORK 


APPENDIX  AVI  —  Continued 

BRONX— TAXES  OF  1909 


Tentative 
assessment  on 
annual  record 

Additions 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Per  ceni 
retained 
on  book 

Resident  personal  
Estates  

$42,088,686 
4,568,429 

$117,455 

$30,493,990 
3,569,924 

72.4 
78  1 

$11,594,696 
998  505 

27.5 
21  8 

Resident  corporations  
Nonresident  corporations.  .  . 

2,937,940 
196,200 

9,330 

1,681,880 
105,790 

56.5 
53.9 

1,276,060 
90  410 

43.4 
46 

Totals 

$49  791  255 

$126  785 

$35  831  584 

71  9 

$13  959  671 

28 

BRONX  —  TAXES  OF  1910 


Resident  personal  
Estates  
Resident  corporations  
Nonresident  corporations..  . 

Totals  

$16,500,599 
4,111,498 
2,446,860 
148,410 

$11,047,284 
3,247,563 
1,137,120 
58,850 

66.9 
78.9 
46.4 
39.6 

$5,453,315 
863,935 
1,309,740 
89,560 

33 
21 
53.5 
60.3 

$23,207,367 

$15,490,817 

66.7 

$7,716.550 

$2,539,225 
978,070 
1,395,600 
74,000 

33.2 

44.7 
21.9 
54.9 
76.6 

Resident  personal  

B 

$5,678,475 
4,461,235 
2,541,300 
96,500 

RONX  —  TAXE 

$16,600 
3,800 
17,600 

S  OF  1911 
$3,139,250 
3,483,165 
1,145,700 
22,500 

55.2 
78.0 
45 
23.3 

Estates 

Resident  corporations  
Nonresident  corporations..  . 

Totals            

$12,777,510 

$38,000 

$7,790,615 

60.9 

$4,986,895 

39 

BRONX  — TAXES  OF  1912 


Resident  personal  

$2,760,325 

$665,710 

24.1 

$2,094,615 

75.8 

Estates  

4,395,570 

3,486,387 

79.3 

909,183 

20  6 

Resident  corporations  

2,548,400 

1,034,600 

40  6 

1,513,800 

59.4 

Nonresident  corporations 

81  400 

3  800 

4  6 

77  600 

95.3 

Totals  

$9,785,695 

$5,190,497 

53 

$4,595,198 

46.9 

Resident  personal 

Estates 

Resident  corporations .... 
Nonresident  corporations. . 


Totals. 


BRONX  —  TAXES  OF  1913 

$5,200,115 
3,980,183 
2,665,500 
146,000 

$31,700 
10,500 
2,500 

$2,850,790 
3,070,848 
923,100 
53,000 

54.8 
77.1 
34.6 
36.3 

$2,349,325 
909,335 
1,742,400 
93,000 

45.1 

22.8 
65.3 
63.7 

$11,991,798 

$44,700 

$6,897,738 

57.5 

$5,094,060 

42.4 

BRONX  — TAXES  OF  1914 


Resident  personal  

$7,793,600 

$10,200 

$5,305,300 

68 

$2,488,300 

31.9 

Estates  . 

4,448,900 

4,100 

3,451,600 

77.5 

997,300 

22.4 

2  896  400 

738  400 

25  4 

2  158  000 

74  5 

Nonresident  corporations.  .  . 

127,000 

2,000 

9,400 

7.4 

117,600 

92.6 

Totals.           

$15,265,900 

$16,300 

$9,504,700 

62.2 

$5,761,200 

37.7 

BROOKLYN -TAXES  OF  1907 


Tentative 
assessment  on 
annual  record 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Percent 
retained 
on  book 

Personal 

$195  152,905 

$124  213  130 

63.6 

$70,939,775 

36.3 

Estates  

41,775,220 

26,798,810 

64.1 

14,976,410 

35.8 

Resident  corporations 

201,565,300 

195,619,368 

97 

5,945,932 

2.9 

Nonresident  corporations  
Nonresident  individuals  . 

4,275,000 
1,420,000 

3,534,670 
1,155,900 

82.6 
81.4 

740,330 
264,100 

17.3 

18.6 

Totals  

$444,188,425 

$351,321,878 

79 

$92,866,547 

20.9 

JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


255 


APPENDIX  AVI  —  Continued 

BROOKLYN  —  TAXES  OF  1908 


Tentative 
assessment  on 
annual  record 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Per  cent 
retained 
on  book 

Resident  personal  
Estates                                              

$192,343,855 
42,117,955 

$126,380,285 
31,227,163 

65.7 
74.1 

$65,963,570 
10,890,792 

34.2 
25.8 

11,716,750 

5,887,580 

50  2 

5  829,170 

49  7 

Nonresident  corporations  
Tax  Law  Sec  7  Subd  2                          .    . 

898,870 
264,100 

288,930 
109,500 

32.1 
41.4 

609,940 
154,600 

67.8 
58.5 

Totals  

$247,341,530 

$163,893,458 

66.2 

$83,448,072 

33.7 

BROOKLYN  —  TAXES  OF  1909 


Tentative 
assessment  on 
annual  record 

Additions 

Canceled 

Percent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Percent 
retained 
on  book 

Resident  personal  
Estates                 

$192,745,180 
39,328,510 

$221,535 

$125,684,600 
28,942,210 

65.2 
73.5 

$67,060,580 
10,386,300 

34.7 
26  4 

Resident  corporations  
Nonresident  corporations.  . 
Tax  Law,  Sec.  7,  Subd.  2. 

12,751,135 
921,700 
225,000 

41,850 
12,900 

6,617,325 
323,700 
71,500 

51.9 
35.1 
31.7 

6,133,810 
598,000 
153,500 

48.1 
64.8 
68.3 

Totals  

$245,971,525 

$276,285 

$161,639,335 

65.7 

$84,332,190 

34.2 

Resident  personal 

Estates 

Resident  corporations .... 
Nonresident  corporations. . 
Tax  Law,  Sec.  7,  Subd.  2. 


Totals. 


Resident  personal , 

Estates , 

Resident  corporations 

Nonresident  corporations. . , 
Tax  Law,  Sec.  7,  Subd.  2., 

Totals. . . 


Resident  personal 

Estates 

Resident  corporations 
Nonresident  corporations. . 
Tax  Law,  Sec.  7,  Subd.  2. 


Totals. 


Resident  personal . 


Resident  corporations 

Nonresident  corporations. . 
Tax  Law,  Sec.  7,  Subd.  2. 

Totals. . . 


BROOKLYN  —  TAXES  OF  1910 


$196,524,830 
39,264,415 
13,650,550 
1,061,250 

$62,100 
98,300 
210,800 

$152,910,810 
30,877,960 
6,909,550 
523,400 

77.8 
78.6 
50.6 
49  3 

$43,614,020 
8,386,455 
6,741,000 
537  850 

22.1 
21.3 
49.3 
50  g 

153  500 

101  000 

65  8 

52  500 

34  2 

$250,654,545 

$371,200 

$191,322,720 

76.3 

$59,331,825 

23.6 

BROOKLYN  —  TAXES  OF  1911 


$106,895,800 
38,905,805 
10,533,150 
811,500 

$18,050 
2,500 
105,400 

$67,309,455 
30,652,934 
3,151,400 
219,800 

62.9 

78.7 
29.9 
27 

$39,586,345 
8,252,871 
7,381,700 
591,700 

37 
21.2 
70 
72  9 

52,500 

9,500 

18.1 

43,000 

81.9 

$157,198,705 

$125.950 

$101,343.089 

64.4 

$55,855.616 

35.5 

BRO( 
$90,173,995 
38,084,771 
11,362,100 
731,800 
45,000 

DKLYN  —  TAX 
$15,850 
500 
25,800 

ES  OF  1912 
$56,568,700 
30,869,181 
4,095,400 
110,400 

62.7 
81 
36 
15 

$33,605,295 
7,215,590 
7,266,700 
621,400 
45,000 

37.2 
•       18.9 
63.9 
84.9 
100 

$140,397,666 

$42,150 

$91,643,681 

65.2 

$48,753,985 

34.7 

BRO< 
$63,190,195 
37,708,890 
13,351,100 
1,228,000 
45,000 

DKLYN  —  TAX 
$64,000 
300,000 
16,300 
45,000 

ES  OF  1913 
$32,671,840 
31,265,595 
5,152,000 
562,200 

51.6 

82.2 
38.5 
44.1 

$30,582,355 
6,743,315 
8,215,400 
710,800 
45,000 

48.3 
17.7 
61.4 
55.8 
100 

$115,523,185 

$425,300 

$69,651,615 

60 

$46,296,870 

39.9 

256 


STATE  OF  NEW  YORK 


APPENDIX  AVI  —  Continued 

BROOKLYN  —  TAXES  OF  1914 


Tentative 
assessment  on 
annual  record 

Additions 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Per  cent 
retained 
on  book 

Resident  personal  

Estates 

$63,975,710 
38,740,340 

$26,250 
3,200 

$40,776,235 
31  945  350 

63.7 
82  4 

$23,199,475 
6  794,990 

36.2 
17  5 

Resident  corporations  
Nonresident  corporations.  .  . 
Tax  Law,  Sec.  7,  Subd.  2.. 

13,809,000 
856,900 
45,000 

15,000 
1,900 

5,231,400 
167,900 
10,000 

37.8 
19.5 
22.2 

8,577,600 
689,000 
35,000 

62.1 
80.4 

77.7 

Totals  

$117,426,950 

$46,350 

$78,130,885 

66.5 

$39,296,065 

33.4 

RICHMOND  —  TAXES  OF  1907 


Tentative 
assessment  on 
annual  record 

Additions 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Per  cent 
retained 
on  book 

Personal               .       .     . 

$7,799,950 

$4,939,890 

63  3 

$2,860,060 

36.6 

Estates 

1  279,350 

414  315 

32  3 

865  035 

67  6 

Corporations          .     ... 

10,210,000 

9,872,890 

96  7 

337,110 

3.3 

Totals  

$19,289,300 

$15,227,095 

78.9 

$4,062,205 

21 

Resident  personal      

RICE 
$4,873,000 

[MOND  —  TAX 

ES  OF  1908 
$2,755,055 
724,128 
358,370 

56.5 
53.6 
52.5 

$2,117,945 
626,272 
323,180 

43.4 
46.3 
47.4 

Estates 

1,350,400 
681,550 

Resident  corporations  
Totals  

$6,904,950 

$3,837,553 

55.5 

$3,067,397 

44.4 

RICHMOND  —  TAXES  OF  1909 


Resident  personal  

Estates 

$4,756,500 
1,720,750 

$1,900 

$2,805,815 
863,075 

58.9 
50  1 

$1,950,685 
857,675 

41 
49.8 

599  500 

254  700 

42  4 

344  800 

57  5 

Totals  

$7,076,750 

$1,900 

$3,923,590 

55.4 

$3,153,160 

44.5 

RICHMOND  — TAXES  OF  1910 


Resident  personal      

$22,530,275 

$8,375 

$18,409,500 

81.6 

$4,129,150 

18.3 

Estates 

4,298,500 

3  866,120 

89.9 

432,380 

10 

Resident  corporations  

1,464,950 
23,000 

22,200 

693,200 
20,000 

46.6 
86.9 

793,950 
3,000 

53.3 
13 

Totals  

$28,316,725 

$30,575 

$22,988,820 

81.1 

$5,358,480 

18.9 

RICHMOND  —  TAXES  OF  1911 


Resident  personal  — 


Resident  corporations 

Nonresident  corporations. . 

Totals... 


$2,000,740 
2,207,450 
549,500 
60  000 

$4,000 
2,500 
1,500 

$985,200 
1,664,705 
233,000 

$4,817,690 

$8,000 

$2,882,905 

49.1 
75.3 

42.2 
0.0 

59.7 


$1,019,540 

545,245 

318,000 

60,000 


$1,942,783 


Resident  personal 

Estates 

Resident  corporations 
Nonresident  corporations. . 

Totals. . . 


RICB 
$1,161,200 
1,909,835 
500,500 
65,000 

MOND  —  TAX 

ES  OF  1912 
$286,500 
1,454,050 
141,000 
„    4,500 

24.6 
76.1 
28.1 
6.9 

$874,700 
455,785 
359,500 
60,500 

:::::::::::: 

$3,636,535 



$1,886,050 

51.8 

$1,750,485 

JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


257 


APPENDIX  AVI  —  Continued 

RICHMOND  —  TAXES  OF  1913 


Tentative 
assessment  on 
annual  record 

Additions 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Per  cent 
retained 
on  book 

Resident  personal  
Estates 

$2,240,400 
2,921,485 

$1,395,650 
2,390,010 

37.7 
81  8 

$844,750 
531  475 

62.2 
18  1 

Resident  corporations  
Nonresident  corporations.  .  . 

447,500 
72,500 

111,500 
7,500 

24.9 
10.3 

336,000 
65,000 

75 

89.6 

Totals  

$5,681,885 

$3,904,660 

68.7 

$1,777,225 

31.2 

RICHMOND  —  TAXES  OF  1914 


Resident  personal  

$1,368,450 

$650,150 

47.5 

$718,300 

52  4 

Estates 

1  390  275 

977  700 

70  3 

412  575 

29  6 

Resident  corporations  
Nonresident  corporations. 

465,000 
60,000 

101,000 

21.7 
0  0 

364,000 
60,000 

78.2 
100 

Totals  

$3,283,725 

$1,728,850 

52.6 

$1,554,875 

47.3 

QUEENS  —  TAXES  OF  1907 


Tentative 
assessment  on 
annual  record 

Additions 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Per  cent 
retained 
on  book 

Personal  

$16,979,400 

$8,449,700 

49.7 

$8,529,700 

50.2 

Estates 

5,382,323 

3,866,876 

71.8 

1,515,447 

28  1 

Corporations 

40  303  150 

39,157,035 

97  1 

1,146,115 

2  8 

Totals 

$62,664  873 

$51,473,611 

82.1 

$11,191,262 

17.8 

QUEENS  —  TAXES  OF  1908 


Resident  personal 

Estates 

Resident  corporations . . . 

Totals... 


$13,912,325 
2,993,547 

$5,935,505 
1,901,272 

42.6 
63.5 

$7,976,820 
1,092,275 

57.3 
36.4 

2,262,500 

1,422,765 

62.8 

839,735 

37.1 

$19,168,372 



$9,259,542 

48.3 

$9,908,830 

51.6 

QUEENS  —  TAXES  OF  1909 


lesident  personal 

Estates 

lesident  corporations. . . 
Nonresident  corporations. 

Totals... 


$15,650,375 
6,088,800 
2,044,800 
20,000 

$735,275 
2,550,000 
73,925 

$8,151.500 
4,783,450 
1,175,925 
20,000 

52 

78.5 
57.5 
100 

$7,498,875 
1,305,350 
868,975 

47.9 
21.4 
42.5 
0.0 

$23,804,075 

$3,359,200 

$14,130,875 

59.3 

$9,673,200 

40.6 

QUEENS  —  TAXES  OF  1910 


lesident  personal 

Cstates 

lesident  corporations 
Nonresident  corporations. 

Totals. . . 


$22,538,650 
4,298,500 

$8,375 

$18,409,500 
3,866,120 

81.6 
89.9 

$4,129,150 
432,380 

18.3 
10 

1,487.150 
23  000 

22,200 

693,200 
20,000 

46.6 
86.9 

793,950 
3,000 

53.3 
13 

$28,347,300 

$30,575 

$22,988,820 

81.1 

$5,358,480 

18.9 

QUEENS  — TAXES  OF  1911 


lesident  personal 

Estates 

leaident  corporations.  .  . 
Nonresident  corporations 

Totals... 


$17,152,000 
3  085  880 

$13,300 

$13,470,425 
2,500,280 

78.5 
81 

$3,681,575 
585,600 

21.4 
18  9 

1,502,200 
129,000 

20,000 

500,500 
58,000 

33.3 
44.9 

1,001,700 
71,000 

66.6 
55 

$21,869,080 

$33,300 

$16,529,205 

75.5 

$5,339,875 

24.4 

258 


STATE  OF  NEW  YORK 


APPENDIX  A  V  1  —  Concluded 

QUEENS  — TAXES  OF  1912 


Tentative 
assessment  on 
annual  record 

Additions 

Canceled 

Per  cent 
canceled 

Receiver's 
book  or  final 
assessment  roll 

Per  cent 
retained 
on  book 

Resident  personal  

$10,732,250 

$1,000 

$6,752,500 

62.9 

$3,980,750 

37 

Estates                        

2,680,000 

1,400 

1,596,700 

59.5 

1,085,300 

40.4 

Resident  corporations  
Nonresident  corporations..  . 

1,807,000 
146,000 

14,500 

616,800 
20,000 

33.8 
13.7 

,  1,204,700 
126,000 

66.1 
86.3 

Totals  

$15,385,850 

$16,900 

$8,986,000 

58.4 

$6,390,750 

41.5 

QUEENS  — TAXES  OF  1913 


Resident  personal  
Estates                 

$13,953,700 
6,230,300 

$1,800 

$9,562,300 
5,48$,  050 

68.5 

88 

$4,391,400 
744,250 

31.4 
11.9 

Resident  corporations  

1,953,800 
190  000 

1,800 

474,600 
64,000 

24.2 
33.6 

1,479,200 
126,000 

75.7 
66  3 

Totals 

$22  327  800 

$3  600 

$15,586,950 

69  8 

$6,740,850 

30.1 

QUEENS  —  TAXES  OF  1914 


Resident  personal  
Estates.  
Resident  corporations  . 

$14,078,200 
3,208,850 
2,257,000 

$8,400 
38,600 

$10,706,100 
2,445,100 
627,700 

76 
76.2 

27.8 

$3,372,100 
763,750 
1,629,300 

23.9 
23.8 
72.1 

150  000 

150,000 

100 

Totals 

$19  694  050 

$47,000 

$13,778,900 

'     69.9 

$5,915,150 

30 

APPENDIX  A  V  2 

SUMMARY  OF  MANHATTAN  PERSONAL  PROPERTY  ASSESSMENTS,  1907 

TO  1914 


YEAR 

Tentative 
assessment 

Amount 
canceled 

Per  cent 
canceled 

Final 
assessment 
roll 

Per  cent 
retained 

1907 

$2  525,084,325 

$2,092,430,167 

82  8 

$432,654,158 

17.1 

1908 

1,120,332,460 

792,521,828 

70.7 

327,810,632 

29.2 

1909  

948,182,757 

615,980,123 

64.9 

332,202,634 

35.0 

1910              

960,971,499 

660,941,016 

68.9 

298,030,483 

31.0 

1911 

657,984,951 

368,186,999 

55.9 

289,797,952 

44.0 

1912 

590,051,167 

308,584,045 

52.2 

281,467,122 

47.0 

1913 

697,876,680 

452,364,345 

61.9 

265,512,335 

38.0 

1914        

622,825,820 

335,057,550 

53.8 

287,768,270 

46.2 

JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


259 


APPENDIX  A  VI  1 

TABLE  SHOWING  AMOUNT  OF  PERSONAL  PROPERTY  ASSESSMENT, 
AMOUNT  OF  TOTAL  PROPERTY  ASSESSMENT  AND  PERCENTAGE  PER- 
SONAL ASSESSMENT  Is  OF  TOTAL  ASSESSMENT,  FOR  THE  CITIES 

AND   TOWNS   OF  THE   STATE.       ClTIES  AND  TOWNS  ARE  ARRANGED 

ACCORDING  TO  THE  PERCENTAGE  OF  PERSONALTY  TO  TOTAL  AS- 
SESSMENT, THE  HIGHEST  PERCENTAGE  RANKING  FIRST 


§ClTY 

Personal 
property 
assessment 
value 

Total 
property 
assessment 
value 

Percentage 
former 
is  of 
latter 

Rank  of 
city 

Johnstown  

$1,237,317 

$4,982,681 

24.5 

1 

Hudson  

1,305,277 

6,321,686 

20.7 

2 

Ogdensburg  

1,440,149 

5,635,896 

20.3 

3 

Plattsburg 

908  461 

4,461,271 

20  3 

4 

Norwich 

876,217 

4,378,823 

19.9 

5 

Port  Jervis    .     .    . 

521,091 

2,669,271 

19.5 

6 

Utica            

10,777,686 

57,678,518 

18.7 

7 

Olean      

2,088,803 

11,513,711 

18 

8 

Gloversville  
Geneva  

1,834,324 
1,502,500 

10,127,999 
10,503,701 

17.8 
14.3 

9 
10 

Little  Falls 

1,139,134 

7,897,409 

14.1 

11 

Oswego 

1,821,411 

13,415,483 

13.4 

12 

Rome         

1,470,947 

11,271,515 

13 

13 

Middletown  

172,163 

1,311,334 

13 

14 

Oneonta  

787,100 

6,268,972 

12.8 

15 

Newburgh 

1,802,122 

14,204,094 

12.7 

16 

Beacon 

967,348 

7,468,300 

12.6 

17 

Glens  Falls 

1,398,400 

10,462,925 

12.5 

18 

Hornell           ... 

918,726 

7,378,278 

12.3 

19 

Canandaigua  

607,509 

4,929,187 

12.2 

20 

Watertown  

2,060,650 

16,853,970 

12.2 

21 

Batavia 

1,298,537 

9,939,843 

12.1 

22 

Albany 

13,883,272 

109,857,472 

11.9 

23 

Ithaca              .        .        ... 

1,337,675 

11,181,732 

11.7 

24 

Amsterdam  

1,600,277 

13,457,056 

10.7 

25 

Oneida  
Jamestown 

524,908 
1,975,388 

5,064,149 
18,800,052 

10.3 
10.1 

26 
27 

Kingston 

1,649,235 

16,731,354 

9.6 

28 

Poughkeepsie                   .  .  . 

2,614,027 

27,032,935 

9.6 

29 

Trov 

5,637,669 

58,240,189 

9.6 

30 

Tonawanda  

431,138 

5,254,320 

8.2 

31 

Lockport 

937,644 

11,771,573 

7.9 

32 

North  Tonawanda 

770,932 

9,795,407 

7.8 

33 

Cohoes                              .  .    . 

1,101,862 

13,248,573 

7.7 

34 

Buffalo                            

26,199,127 

365,053,595 

7.1 

35 

Fulton                 

458,140 

6,463,628 

7.0 

36 

Binghamton  
Dunkirk  

2,656,576 
699,765 

34,703,037 
10,165,927 

6.9 

6.8 

37 

38 

Rochester 

14,842,409 

220,669,819 

6.7 

39 

Syracuse 

9,771,210 

146,898,597 

6.7 

40 

Auburn.  . 

1,508,813 

22,539,280 

6.6 

41 

260 


STATE  OF  NEW  YORK 
APPENDIX  A  VI  1  —  Concluded 


CITY 

Personal 
property 
assessment 
value 

Total 
property 
assessment 
value 

Percentage 
former 
is  of 
latter 

Rank  of 
city 

Elmira  

$1,680,700 

$26,857,606 

6.0 

42 

Schen.6ct8.dy 

3  081  392 

58,264,632 

5.3 

43 

Corning 

442  284 

9,272,522 

4.7 

44 

Cortland 

867,599 

19,259,265 

4.5 

45 

Salamanca 

206,656 

4,826,842 

4.2 

46 

Rensselaer 

171,089 

5,935,643 

2.9 

47 

Niagara  Falls 

1,157,684 

37,300,349 

2.9 

48 

Yonkers 

3,351,672 

117,432,358 

2.9 

49 

Watervliet 

157,890 

5,850,392 

2.7 

50 

Lackawanna 

115,450 

7,568,669 

1.4 

51 

New  Rochelle 

394,661 

41,231,942 

.95 

52 

Mount  Vernon 

342,780 

39,921,272 

.86 

53 

APPENDIX  A  VI  2 

TABLE  SHOWING  NUMBER  OF  CITIES,  THE  PERSONAL  PROPERTY 
ASSESSMENT  OF  WHICH  is  LESS  THAN  ONE  PER  CENT,  THREE 
PER  CENT,  ETC.,  RESPECTIVELY,  OF  THE  TOTAL  PROPERTY 

ASSESSMENT. 


1.  Number  of  cities  the  personal  property  assessment  of  which  is 

less  than  1  per  cent  of  total  assessment .... 

2.  Ditto          from    1  to    3  per  cent 

3.  Ditto          from    4  to    6  per  cent 

4.  Ditto          from    6  to    8  per  cent 

5.  Ditto          from    8  to  11  per  cent 

6.  Ditto          from  11  to  13  per  cent 

7.  Ditto          from  13  to  18  per  cent 

8.  Ditto          from  18  to  20  per  cent 

9.  Ditto          from  20  to  21  per  cent 

10.  Ditto          greater  than  21  per  cent 


2 
5 
5 

10 
7 

12 
5 
3 
3 
1 


Total. 


53 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


261 


APPENDIX  B  I 

PER  CAPITA  COST  OF  STATE  GOVERNMENT  IN  THE  STATES,  1912'* 


Per 

State  capita 

Alabama $2  77 

Arizona 6  20 

Arkansas 1  87 

California 7  98 

Colorado 3  46 

Connecticut 5  58 

Delaware 3  15 

District  of  Columbia 35  45 

Florida 3  41 

Georgia 1  96 

Idaho 7  81 

Illinois 2  21 

Indiana 2  92 

Iowa 2  69 

Kansas 2  96 

Kentucky 3  33 

Louisiana 3  92 

Maine 5  84 

Maryland 5  27 

Massachusetts 7  02 

Michigan 4  30 

Minnesota 6  66 

Mississippi 2  29 

Missouri 2  27 

Montana .  .  ....  6  66 


Per 

State  capita 

Nebraska $2  90 

Nevada 10  45 

New  Hampshire 3  41 

New  Jersey 4  88 

New  Mexico 3  09 

New  York 693 

North  Carolina 1  46 

North  Dakota 4  84 

Ohio 2  63 

Oklahoma 1  89 

Oregon 4  17 

Pennsylvania 3  71 

Rhode  Island 6  32 

South  Carolina 1  46 

South  Dakota 4  60 

Tennessee 1  84 

Texas 2  97 

Utah 6  09 

Vermont 6  51 

Virginia 3  22 

Washington 4  47 

West  Virginia 2  14 

Wisconsin 5  27 

Wyoming 5  20 


Abstract  of  special  bulletin?,  Wealth,  Debt  and  Taxation,  1913,  pa?os  44-50. 


262 


STATE  OF  NEW  YORK 


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JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


265 


APPENDIX  B  II  4 

PEE,  CAPITA  MUNICIPAL,  INDEBTEDNESS  FOB  MUNICIPAL  PURPOSES 
(LESS  SINKING  FUND  ASSETS)   OF  THE  REMAINING  CITIES 


CITY 

1913 

1902 

1890 

Batavia 

$35  33 

$1  96 

$4  85 

Cohoes.          

32  18 

30  73 

11  30 

Corning  

33  98 

18  88 

9  45 

Cortland  

58  03 

32  71 

3  75 

Dunkirk  

24  48 

28  93 

14  31 

Fulton 

46  78 

57  78 

38 

Geneva         

36  56 

39  93 

Glens  Falls  

24  42 

29  78 

15  25 

Gloversville  

34  97 

19  81 

11  00 

Hornell 

39  47 

40  63 

Hudson 

30  66 

28  31 

28  31 

Ithaca 

96  98 

20  96 

4  05 

Jamestown     

20  75 

25  68 

7  79 

Kingston  .    . 

37  91 

43  29 

21  59 

Lackawanna  

27  39 

Little  Falls  

30  51 

39  93 

34  73 

Lockport 

37  33 

13  59 

15  40 

Middletown 

30  99 

33  30 

12  81 

Newburgh 

44  00 

25  63 

14  47 

North  Tonawanda      .                            .... 

49  52 

75  27 

Ogdensburg  

27  22 

16  11 

10  80 

Olean  

30  86 

20  62 

13  79 

Oneida  

28  65 

35  12 

5  10 

Oneonta. 

33  69 

14  55 

6  86 

Ossining 

72  78 

23  91 

24  06 

Oswego.             .    . 

31  85 

47  22 

39  83 

Peekskill     

53  11 

26  57 

14  97 

Plattsburg  

28  86 

25  35 

27  51 

Port  Chester  

53  45 

15  35 

14  41 

Port  Jervis 

14  24 

10  03 

Poughkeepsie 

67  36 

72  60 

79  74 

Rensselaer     ...        .                           '.    

30  57 

34  04 

13  60 

Rome  

42  44 

33  84 

10  67 

Saratoga  Springs  

40  26 

36  34 

25  97 

Tonawanda 

60  55 

56  88 

17  63 

Watertown 

41  15 

33  78 

15  48 

Watervliet                                                   

23  65 

22  89 

15  19 

White  Plains   

140  47 

155  55 

25  48 

SUMMARY 

(The  above  includes  all  the  remaining  cities  except  Geneva,  Hornell,  Lackawanna 
North  Tonawanda  and  Port  Jervis,  for  which  data  is  lacking  for  certain  years.) 

Average  for  1913 ...  $43 . 21878 

Average  for  1902 33.999 

Average  for  1890 17.2887 


Per  cent  increase  for  1913  over  1890 
Per  ecnt  increase  for  1902  over  1890. 


149.98 
96.65 


266  STATE  OF  NEW  YORK 

APPENDIX  B  II  5 

PEE  CAPITA  TAXES  FOR  MUNICIPAL  PURPOSES  LEVIED  ON  GEN- 
ERAL PROPERTY  IN  REMAINING  CITIES 

CITIES  1913 

Batavia $11  85 

Cohoes 7  89 

Corning :  8  09 

Cortland 9  95 

Dunkirk 7  98 

Fulton 10  07 

Geneva 10  42 

Glens  Falls 10  48 

Gloversville 8  76 

Hornell 10  47 

Hudson 7  55 

Ithaca 14  12 

Jamestown 11  68 

Kingston 11  57 

Lackawanna 8  69 

Little  Falls 6  64 

Lockport 14  17 

Middletown 11  20 

Newburgh 12  29 

North  Tonawanda 13  11 

Ogdensburg 5  46 

Olean 10  04 

Oneida 8  79 

Oneonta 9  47 

Ossining 12  03 

Oswego 12  31 

Peekskill 9  55 

Plattsburg 7  15 

Port  Chester 14  93 

Port  Jervis 9  75 

Poughkeepsie 13  35 

Rensselaer 9  65 

Rome 8  36 

Saratoga  Springs 15  34 

Tonawanda 13  88 

Watertown 12  72 

Watervliet 8  45 

White  Plains.  .  21  12 


NOTE.—  Data  for  the  years  1890  to  1912  is  lacking. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  267 

APPENDIX  B  II  6 

PER  CAPITA  EXPENDITURES  FOR  MUNICIPAL  PURPOSES  IN  REMAIN- 
ING CITIES 

Cities  1913 

Batavia $15  78 

Cohoes 11  79 

Corning 11  42 

Cortland 15  09 

Dunkirk 15  03 

Fulton 28  34 

Geneva 18  75 

Glens  Falls 14  38 

Gloversville 14  50 

Hornell , 20  49 

Hudson 11  31 

Ithaca \  .  20  47 

Jamestown 13  17 

Kingston 15  71 

Lackawanna 19  51 

Little  Falls 13  93 

Lockport 19  29 

Middletown 19  46 

Newburgh 19  63 

North  Tonawanda 19  62 

Ogdensburg 15  39 

Olean 18  51 

Oneida 14  58 

Oneonta 13  26 

Ossining 20  31 

Oswego 14  64 

Peekskill 14  91 

Plattsburg 14  95 

Port  Chester 18  68 

Port  Jervis 12  89 

Poughkeepsie 30  09 

Rensselaer 13  90 

Rome 13  43 

Saratoga  Springs f 18  98 

Tonawanda 18  13 

Watertown ' 17  13 

Watervliet 14  60 

White  Plains 30  16 

NOTE.—  Data  for  the  years  1890  to  1912  is  lacking. 


268 


STATE  OF  NEW  YOEK 


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JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


271 


APPENDIX  D  II 

DOMESTIC  CORPORATIONS  ASSESSED  UNDER  SECTION  12  OF  THE  TAX 
LAW,  IN  TOWN  OF  ESOPUS,  COUNTY  OF  ULSTER,  WITH  THE 
AMOUNT  OF  CAPITAL  STOCK  AS  OBTAINED  IN  THE  OFFICE  OF  THE 
SECRETARY  OF  STATE,  AND  THE  PERSONAL  PROPERTY  ASSESS- 
MENTS PLACED  ON  SUCH  DOMESTIC  CORPORATIONS  BY  THE  ASSESS- 
ORS OF  THE  TOWN 


Capital  stock 

E  100 $5,000 

E  101 10,000,000 

E  102 300,000 

E  103 30,000 

E  104 150,000 

E  105 150,000 

E  106 201,870 

E  107 100,000 

E108 200,000 

E  109 100,000 

E  110 40,000 

Bill 15,000 

E  112 30,000 

E  113 200,000 

E  114 300,000 

E  115 25,000 

E  116 120,000 

E  117 200,000 

E  118 20,000 

E  119 1,000,000 

E  120 100,000 

E121 250,000 

E  122 50,000 

E  123 50,000 

E  124 85,000 

E125 1,000,000 

E  126 400,000 

E127 5,500,000 

E  128  160,000 

E129 1,500,000 

E130 5,000,000 

E131 150,000 

E  132  1,200,000 

E  134      200,000 

E135 150,000 

E  136 100,000 

E137..             100,000 


Assessment 

under 
Section  12 

$500 
1,800 
1,500 
400 
800 
3,000 
800 
800 
500 
500 
500 
300 
500 
4,000 
400 
400 
500 
300 
300 
8,000 
800 
800 
2,000 
1,000 
1,500 
1,000 
1,000 
2,000 
250 
500 
500 
500 
500 
500 
000 
300 
1,000 


272  STATE  OF  NEW  YORK 

APPENDIX  D  II  —  Concluded 


under 
Capital  stock        Section  12 

E  138 $30,000  $500 

E  139 500  500 

E  140 100,000  500 

E  141 350,000  1,200 

E  142 100,000  500 

E  143 500,000  1,500 

E  144 150,000  1,000 

E  145 10,000  500 

E  146 250,000  1,000 

E  147 150,000  300 

E  148 200,000  750 

E  149 135,000  800 

E  150 100,000  200 

E  151 2,000,000  1,500 


$33,257,370  $60,700 


SUMMARY  OF  ABOVE  TABLE 

Number  of  corporations 51 

Aggregate  capital  stock $33,257,370 

Aggregate  assessment $60,700 

Aggregate  assessment  as  per  cent  of  aggregate  capital  stock 0 . 18% 

or  less  than 
1/5  of  1% 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


273 


APPENDIX  D  III 

DOMESTIC  CORPORATIONS  ASSESSED  UNDER  SECTION  12  OF  THE  TAX 
LAW,  IN  TOWN  OF  WASHINGTON,  COUNTY  OF  DUTCHESS,  WITH 
THE  AMOUNT  OF  CAPITAL  STOCK  AS  OBTAINED  IN  THE  OFFICE 
OF  THE  SECRETARY  OF  STATE,  AND  THE  PERSONAL  PROPERTY 
ASSESSMENT  PLACED  ON  SUCH  DOMESTIC  CORPORATIONS  BY 
THE  ASSESSORS  OF  THE  TOWN 


Assessment 

Designation  of 

under 

corporation 

Capital  stock 

Section  12 

D  101  

$2,000,000 

$100,000 

D  102  

50,000 

1,000 

D  103  

120,000 

3,000 

D  104  

16,000,000 

50,000 

D  105  

1,000 

500 

D  106  

17,500,000 

150,000 

D  107  

300,000 

500 

D  108  :... 

100,000 

5,000 

D  109  

1,000,000 

5,000 

D  110  

50,000 

2,500 

D  111  

30,000 

1,000 

D  112  

10,000 

500 

D  113  

150,000 

1,000 

D  114  

50,000 

1,000 

D  115  

1,000,000 

50,000 

D  116  

100,000 

1,000 

D  117  

100,000 

1,000 

D  118  

No  record 

2,000 

D  119  

1,750,000 

30,000 

D  120  

250,000 

5,000 

D  121  

1,000,000 

1,000 

D  122  

250,000 

500 

D  123  

200,000 

5,000 

D  124  

500,000 

500 

D  125  

1,500,000 

500 

D  126  

100,000 

1,000 

D  127  

50,000 

1,000 

D  128  

180,000 

3,000 

D  129  

i       100,000 

10,000 

D  130  

**            25,000 

500 

D  131  

50,000 

1,000 

D  132  

400,000 

1,000 

D  133  

1,200,000 

500 

D  134  

1,125,000 

500 

D  135  

1,500,000 

15,000 

D  136  

100,000 

10,000 

D  137  

500,000 

3,000 

274 


STATE  OF  NEW  YORK 


APPENDIX  D  III  —  Concluded 


Designation  of 
corporation 

D  138 

D  139 

D  140 

D  141 

D  142 

D  143... 


Capital  stock 

$400,000 

2,000,000 

1,000 

60,000 

400,000 

100,000 


Assessment 

under 
Section  12 
$10,000 
500 
1,000 
1,000 
500 
500 


SUMMARY 

Number  of  corporations 43 

Aggregate  capital  stock $52,302,000 

Aggregate  assessment $477 , 500 

Aggregate  assessment  as  per  cent  of  capital  stock 0 . 91% 

or  less 
than  1% 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  275 

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APPENDIX  D  VI  1 

BONDED  DEBT  OF  THIRTY-SIX  DOMESTIC  MANUFACTURING  CORPORA- 
TIONS TAKEN  AT  EANDOM 


Designation  of 

Bonded 

Capital  stock 

corporation 

debt* 

outstanding 

B.D.    1  

$2,000,000 

$3,896,000 

B.  D.    2  

433,000 

500,000 

B.D.    3  

3,164,000 

9,325,000 

B.D.    4  

12,067,500 

101,485,700 

B.D.    5  

500,000 

500,000 

B.D.    6  

17,426,234 

20,359,000 

B.D.    7  

.21,399,834 

39,849,500 

B.  D.    8  

640,000 

789,500 

B.D.    9  

3,414,500 

4,907,000 

B.D.  10  

41,313,000 

34,756,000 

B.D.  11  

7,743,728 

10,000,000 

B.D.  12  

375,000 

500,000 

B.D.  13  

1,785,000 

15,000,000 

B.D.  14  

822,000 

4,000,000 

B.D.  15  

851,612 

500,000 

B.D.  16  

125,000 

500,000 

B.D.  17  

3,800,000 

2,500,000 

B.D.  18  

3,000,000 

7,924,700 

B.D.  19  

1,038,277 

2,000,000 

B.D.  20  

600,000 

600,000 

B.D.  21  

95,000 

328,300 

B.D.  22  

11,335,100 

6,000,000 

B.D.  23  

500,000 

500,000 

B.  D.  24  

614,550 

3,135,161 

B.D.  25  

4,000,000 

15,000,000 

B.D.  26  

225,000 

600,000 

B.  D.  27  

2,765,000 

1,000,000 

B.D.  28  

2,080,000 

6,800,000 

B.D.  29  

740,200 

2,300,000 

B.D.  30  

1,497,963 

1,600,000 

B.D.  31  

1,500,000 

1,250,000 

B.  D.  32  

5,123,350 

8,554,425 

B.D.  33  

1,500,000 

1,000,000 

B.D.  34  

6,850,000 

2,410,000 

B.D.  35  

100,000 

1,011,000 

B.D.  36  

273,048 

571,000 

SUMMARY 

Aggregate  bonded  debt  

$161,697,896 

Aggregate  capital  stock  outstanding  

311,952,286 

Bonded  debt  as  per  cent  of  capital  stock  

51.8% 

In  some  cases  notes  payable  are  included. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


283 


APPENDIX  D  VI  2 

BONDED  DEBT  OF  THIRTY-EIGHT  DOMESTIC  MERCANTILE  AND  MIS- 
CELLANEOUS CORPORATIONS  SELECTED 


Designation  of 

Bonded 

Capital  stock 

corporation 

debt* 

outstanding 

B.  M.    1  

$2,700,000 

$5,000,000 

B.  M.    2  

19,593,900 

10,084,00° 

B.  M.    3  

3,550,000 

4,000,000 

B.  M.    4  

2,500,000 

2,000,000 

B.  M.    5  

5,000,000 

5,000,000 

B.  M.    6  

700,000 

750,000 

B.  M.    7  

7,540,072 

10,457,200 

B.  M.    8  

2,969,500 

3,665,800 

B.  M.    9  

1,900,000 

1,357,500 

B.  M.  10  

2,000,000 

2,000,000 

B.  M.  11  

4,027,000 

3,500,000 

B.  M.  12  

10,000,000 

2,000,000 

B.  M.  13  

9,200,000 

6,000,000 

B.  M.  14  

1,500,000 

2,942,750 

B.  M.  15  

1,100,000 

9,800,000 

B.  M.  16  

4,193,000 

3,000,000 

B.  M.  17  

1,004,871 

740,200 

B.  M.  18  

3,025,000 

22,755,000 

B.  M.  19  

4,809,958 

2,000,000 

B.  M.  20  

2,960,141 

248,103 

B.  M.  21  

1,200,000 

1,000,000 

B.  M.  22  

2,720,000 

2,250,000 

B.  M.  23  

954,633 

1,000,000 

B.  M.  24  

446,500 

300,000 

B.  M.  25  

3,000,000 

1,700,000 

B.  M.  26  

1,857,781 

6,900,000 

B.  M.  27  

352,000 

375,000 

B.  M.  28  

3,700,950 

10,500,000 

B.  M.  29  

750,000 

1,000,000 

B.  M.  30  

380,375 

565,600 

B.  M.  31  

75,750 

198,500 

B.  M.  32  

156,500 

249,600 

B.  M.  33  

4,797,215 

7,395,100 

B.  M.  34...  

769,000 

1,180,400 

B.  M.  35  

487,500 

400,000 

B.  M.  36  

3,649,871 

6,000,000 

B.M.37  

220,000 

900,000 

B.  M.  38  

2,277,690 

3,977,000 

SUMMARY 

Aggregate  bonded  debt  

$118,069,207 

Aggregate  capital  stock  outstanding  

143,191,753 

Bonded  debt  as  per  cent  of  capital  stock  

82.4% 

*  In  some  cases  notes  payable  are  included. 


284  STATE  OF  NEW  YORK 

APPENDIX  D  VII 

SELECTED  LIST  OF  DOMESTIC  CORPORATIONS  WITH  GOOD  WILL  OF 

GREAT  VALUE 


Designation  of 

Capital  stock 

corporation 

Good  will 

outstanding 

Total  assets 

G.  W.    1  

$15,000,000 

$19,300,000 

$21,623,840 

G.  W.    2  

600,000 

1,000,000 

2,115,563 

G.  W.    3  

7,500,000 

9,800,000 

12,202,852 

G.  W.    4  

5,664,000 

9,145,000 

14,081,332 

G.  W.    5  

1,000,000 

3,000,000 

3,937,286 

G.  W.    6  

5,000,000 

7,850,000 

9,080,957 

G.  W.    7  

15,525,310 

22,755,000 

31,314,167 

G.  W.    8  

12,000,000 

17,000,000 

19,084,009 

G.  W.    9  

7,451,448 

9,875,000 

10,446,802 

G.  W.  10  

500,000 

945,000 

1,461,654 

G.  W.  11  

7,000,000 

10,000,000 

10,809,428 

G.  W.  12  

3,874,965 

5,800,000 

6,002,213 

G.  W.  13  

7,499,600 

10,500,000 

14,686,162 

G.  W.  14  

3,000,000 

7,395,100 

12,960,426 

G.  W.  15  

600,000 

1,000,000 

1,413,786 

G.  W.  16  

4,000,000 

6,800,000 

8,994,505 

G.  W.  17  

50,000,000 

64,000,000 

74,444,730 

G.  W.  18  

878,792 

1,010,000 

1,047,131 

G.  W.  19  

1,080,258 

900,000 

1,158,728 

G.  W.  20  

386,138 

3,034,070 

3,651,142 

G.  W.  21  

2,637,309 

3,450,000 

4,541,708 

G.  W.  22  

3,023,983 

8,000,000 

10,045,729 

G.  W.  23  

1,524,752 

1,000,000 

3,937,911 

G.  W.  24  

4,966,365 

9,900,000 

14,144,547 

G.  W.  25  

9,786,065 

14,647,200 

19,236,468 

G.  W.  26  

18,000,000 

26,000,000 

21,936,638 

G.  W.  27  

17,947,142 

10,457,200 

21,511,644 

G.  W.  28  

1,794,342 

2,075,000 

3,109,241 

G.  W.  29  

8,025,000 

10,250,500 

14,980,831 

G.  W.  30  

2,800,000 

3,656,526 

G.  W.  31  

1,575,000 

7,480,000 

8,308,073 

G.  W.  32  

500,000 

900,000 

2,006,331 

G.  W.  33  

3,000,000 

5,000,000 

7,188,292 

G.  W.  34  

5,100,000 

6,200,000 

7,270,292 

G.  W.  35  

58,380,902 

89,100,000 

94,936,954 

SUMMARY 

Aggregate  good  will.  .  . 

$287,651,371 

Aggregate  capital  stock 

outstanding  

405,569,070 

Aggregate  total  assets.  . 

497,327,898 

Aggregate  good  will  as 

per  cent  of  capital  stock  

70.9% 

Aggregate  good  will  as 

per  cent  of  total  assets  

57.8% 

JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


285 


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JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


287 


APPENDIX  E  IV 

TABLE  SHOWING  THE  AMOUNT  OF  THE  $38,000,000  INCOME  TAX 
THAT  WOULD  BE  RETURNED  BY  THE  STATE  TO  EACH  COUNTY, 
IF  THIS  TAX  WERE  APPORTIONED  TO  EACH  COUNTY  ACCORD- 
ING TO  THE  RATIO  OF  THE  ASSESSED  VALUE  OF  REAL  ESTATE 

IN    THE    COUNTY    TO    THE    AGGREGATE    ASSESSED    VALUE    OF 
REAL  ESTATE  IN  ALL  THE  COUNTIES. 


COUNTIES 

Assessed  value 
of  real  estate, 
including  village 
property,  real 
estate  of  cor- 
porations and 
special  fran- 
chises 

Percentage 
such  assess- 
ment for  each 
county  is 
of  the  entire 
assessment 
for  the  State 

Amount  of  the 
$38,000,000 
yield  of  the 
income  tax 
allocated  to 
each  county 

Albany    

$135,306,349 

Per  cent 
1  2 

$456  000 

21  229  483 

0  19 

72  200 

50  121  967 

0  44 

16  720 

Cattaraugus       

35,174  263 

0  31 

117  800 

41  389  501 

0  37 

140  600 

Chautauqua  

61,185,310 

0  54 

205  200 

Chemung                     

34,595,626 

0  31 

117  800 

16  472  864 

0  14 

53  200 

Clinton     

10,018,340 

0  08 

30,400 

26,561  393 

0  23 

87  400 

Cortland 

17  012  221 

0  15 

57  000 

Delaware          

15,738,848 

0  14 

53,200 

66  010  836 

0  59 

224  200 

Erie 

407  595  886 

3  65 

1  387  000 

Essex               

14,851,302 

0  13 

49,400 

Franklin                              

13,050  904 

0  11 

41  800 

Fulton 

16  456  624 

0  14 

53  200 

Genesee                

28,040,502 

0  25 

95,000 

12  737,958 

0  11 

41,800 

Hamilton  

4,916,732 

0  044 

16,720 

Herkimer                          .          .        

34,877,231 

0  31 

117,800 

46  354  589 

0  41 

155,800 

Lewis      

10,970,233 

0.09 

34,200 

Livingston                       .             .        

27,240,601 

0  24 

91,200 

21,234  613 

0  19 

72,200 

Monroe  
Montgomery                              

271,783,213 
29  ,  857  ,  687 

2.43 
0  26 

923,400 
98,800 

105,222  041 

0  94 

357,200 

New  York   (Greater)   [including  Bronx,   New 
York,  Kings,  Queens  and  Richmond  coun- 
ties] 

8,049,859  912 

72  22 

27,443,600 

Niagara  

75,606,856 
81,264,851 

0.67 
0  72 

254,600 
273,600 

182  864  850 

1  64 

623,200 

Ontario  

35,792,695 

0.32 

121,600 

53,978,477 

0  48 

182,400 

28,078  172 

0  25 

95,000 

Oswego     

33,521,007 

0.30 

114,000 

Otsego                                                 

24,256,890 

0.21 

79,800 

Putnam  

13,707,606 

0.12 

45,600 

Rensselaer      

83,081,895 

0.74 

281,200 

Rockland                                            

33,302,423 

0  29 

110,200 

Saint  Lawrence  

45,787,133 

0.41 

155,800 

Saratoga         .  .    .          .            

28,178,422 

0.25 

95,000 

64,953,520 

0.58 

220,400 

Schoharie  

11,724,504 

0.10 

38,000 

Schuyler  

6,723,745 

0.06 

22,800 

17,078,374 

0  15 

57,000 

Steuben  

43,480,842 

0.39 

148,200 

Suffolk        

92,063,939 

0.82 

311,600 

Sullivan  .  . 

7,119,881 

0.06 

22,800 

288 


STATE  OF  NEW  YORK 
APPENDIX  F  IV  —  Concluded 


COUNTIES 

Assessed  value 
of  real  estate, 
including  village 
property,  real 
estate  of  cor- 
porations and 
special  fran- 
chises 

Percentage 
such  assess- 
ment for  each 
county  is 
of  the  entire 
assessment 
for  the  State 

Amount  of  the 
$38,000,000 
yield  of  the 
income  tax 
allocated  to 
each  county 

Tioga                                                 .        

$13,860,147 

Per  cent 
0  12 

$45  600 

Tompkins               

20,641,257 

0  18 

68  400 

Ulster                                      

32,904,296 

0  29 

110  200 

Warren 

16,012  611 

0  14 

53  200 

20,462,596 

0  18 

68  400 

Wayne 

32,654,979 

0  29 

110  200 

Westchester                                    

389,896,028 

3  49 

1  326  200 

19,795,811 

0  17 

64  600 

Yates                                 

11,610,176 

0.10 

38  000 

Total              

$11,146,271,012 

99,734 

$37  898  920 

. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


APPENDIX  F  V 

ESTIMATE  OF  POSSIBLE  YIELD  OF  STAMP  TAXES  ON  CHECKS, 
NOTES,  BILLS  OF  EXCHANGE  AND  OTHER  LEGAL  INSTRUMENTS 
IN  NEW  YORK  STATE 

For  the  purpose  of  estimating  the  possible  yield  of  stamp  taxes 
in  New  York  State  the  Committee  caused  to  be  made  a  study  of 
the  following :  first,  the  stamp  taxes  in  France,  Germany  and  the 
United  Kingdom;  and  second,  the  Federal  stamp  taxes  in  the 
United  States  (a)  during  the  Civil  War,  (b)  during  the  Spanish- 
American  War  and  (c)  under  the  present  Federal  Emergency 
Revenue  A,ct. 

With  few  exceptions,  the  data  obtained  concerning  France, 
England  and  Germany  was  of  little  value  for  purposes  of  estimat- 
ing the  possible  yield  of  such  taxes  in  the  United  States.  The  taxes 
in  these  countries  are  levied  upon  many  miscellaneous  sources,  and 
a  number  of  these  important  sources  is  already  reached  in  the  State 
of  New  York  by  other  forms  of  taxation.  With  the  exception  of  a 
few  of  the  German  figures  the  Committee  found  it  impossible  to 
use  the  foreign  figures  for  even  an  approximate  estimate.  Out 
of  the  complexity  of  the  German  system  we  may  select  the  follow- 
ing figures  as  offering  the  easiest  basis  of  a  comparison. 

The  total  revenue  receipts  from  bills  of  exchange,  promissory 
notes,  etc.,  in  all  Germany  (Federal  Tax)  are  as  follows: 

1909 $4,661,250 

1910 4,684,250 

1911 4,670,250 

1912 4,865,250 

1913 4,780,500 

The  total  revenue  receipts  from  the  tax  on  checks  in  all  Ger- 
many (Federal  Tax)  was  as  follows: 

1909 $751,000 

1910 890,000 

1911 777,250 

1912 779,500 

1913 784,000 

10 


290  STATE  or  NEW  YORK 

Because  of  the  complexity  of  the  German  rates  it  is  impossible 
to  estimate  even  with  rough  accuracy  what  such  a  tax  might  yield 
in  New  York  State. 

In  considering  the  above  tables  it  should,  of  course,  be  borne  in 
mind  that  the  amount  of  revenue  in  each  case  represents  the  aggre- 
gate for  the  entire  German  Empire.  In  any  case  New  York  State 
could  not  hope  to  obtain  an  amount  representing  anything  like  the 
yield  of  the  German  tax  upon  these  particular  sources. 

CIVIL  WAR  STAMP  TAXES 

During  the  Civil  War,  the  Federal  Government  levied  stamp 
taxes  upon  the  following  fifteen  miscellaneous  sources : 

First:  Agreement  of  contract,  5c. 

Second:  Bank  checks,  2c. 

Third:  Bills  of  exchange,  inland,  varying  from  5e,  upon  bills 
of  $100,  to  $1.50  upon  bills  from  $2,500  to  $5,000. 

Fourth :  Foreign  bills  of  exchange  at  approximately  same  rates 
as  inland. 

Fifth:  Bills  of  lading,  lOc. 

Sixth:  Express  company  receipts,  Ic  and  2c. 

Seventh:  Bonds,  50c. 

Eighth:  Certificates  of  stock  from  lOc  upward. 

Ninth:  Charter  party  $3.00  to  $10.00. 

Tenth:  Broker's  note,  lOc. 

Eleventh:  Conveyance  of  deed  varying  from  50c  when  con- 
sideration is  less  than  $500  to  $20,  when  consideration  is  $20,000. 

Twelfth:  Telegraphic  dispatch  from  Ic  to  3c. 

Thirteenth:  Lease,  50c  to  $1.00. 

Fourteenth:  Power  of  attorney,  25c. 

Fifteenth:  Probate  of  will,  50  cents  to  $1.00. 

In  addition  to  the  above  taxes  we  also  levied  upon  entry  of 
goods  at  customs  house,  life  insurance  policies,  marine  insurance 
policies,  protest  and  other  legal  documents. 

The  yield  of  these  taxes  from  1863  to  1870  is  given  below,  in 
round  numbers,  and,  for  purposes  of  comparison,  the  yield  of  the 
Federal  Income  Taxes  for  the  same  years: 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION 


291 


Year  Stamp  Taxes  Income  Taxes 

1863  .  .  .  . $4,100,000  $455,000 

1864 5,900,000  14,900,000 

1865 11,200,000  20,600,000 

1866 15,000,000  60,900,000 

1867 16,100,000  64,900,000 

1868 14,900,000  34,100,000 

1869 15,000,000  34,600,000 

1870 15,600,000  36,600,000 


No  record  has  been  kept  of  the  yield  of  the  stamp  taxes  by 
states.  However,  a  very  rough  idea  of  this  yield  in  New  York 
State  may  be  obtained  by  comparing  it  with  the  yield  of  other 
federal  taxes  in  New  York  State. 

The  following  table  shows  the  percentage  of  the  total  yield  of 
the  Federal  Income  Taxes  and  of  the  Internal  Revenue  Taxes 
collected  in  New  York  State; 


Year  Income  Taxes 

1864 33  per  cent. 

1865 30  per  cent. 

1866 30  per  cent. 

1867 31  per  cent. 

1868 30  per  cent. 

1869 31  per  cent 

1870 28  per  cent. 


Internal  Revenue 
Taxes 

24  per  cent. 
24  per  cent. 
24  per  cent. 

24  per  cent. 
22  per  cent. 

25  per  cent. 
22  per  cent. 


Average 31  per  cent.     24  per  cent. 


From  the  above  it  would  seem  fair  to  assume  that  New  York's 
share  of  the  total  amount  raised  by  the  Federal  Government  from 
stamp  taxes  would  be  not  less  than  24  per  cent,  at  that  time.  This 
percentage  is,  of  course,  of  no  importance  except  as  it  may  be  used 
to  check  up  later  estimates  of  the  percentage  of  the  Spanish  War 
taxes  collected  in  New  York  State. 


292  STATE  OF  NEW  YORK 

STAMP   TAXES   LEVIED  DURING   THE  SPANISH-AMERICAN  WAR 

PERIOD 

During  the  Spanish-American  War,  the  Federal  Government 
levied  stamp  taxes  on  the  following  twenty-one  miscellaneous 
sources;  bonds,  certificates  of  stock,  sales  or  agreements  to  sell, 
bank  checks,  certificates  of  deposits,  bills  of  exchange,  bills  of 
lading,  telephone  messages,  indemnity  bonds,  certificates  of  pro- 
test, brokers'  contracts,  conveyances,  telegraph  dispatches,  various 
forms  of  insurance,  leases,  manifests  for  customs  house  entry, 
mortgages,  foreign  steamship  tickets,  power  of  attorney,  protests 
and  warehouse  receipts. 

With  few  exceptions  the  sources  taxed,  as  well  as  the  rates,  were 
substantially  the  same  as  the  Civil  War  taxes.  In  a  few  cases  the 
Civil  War  taxes  were  higher  than  the  Spanish-American  War 
taxes. 

The  total  yield  of  these  taxes  for  the  entire  country  for  the 
years  1898  to  1901  were  as  follows: 

1898 $724,073 

*1899 38,618,081 

1900 36,416,082 

1901 34,998,836 


As  in  the  case  of  the  Civil  War  stamp  taxes,  no  record  has 
been  kept  of  the  yield  of  the  stamp  taxes  for  this  period  by  states. 
We  may,  however,  roughly  approximate  the  yield  of  these  taxes 
in  New  York. 

In  the  following  tables  we  give  the  total  internal  revenue  col- 
lected in  the  United  States,  the  amount  collected  in  New  York 
State,  and  the  percentage  of  the  total  collected  in  New  York  State 
for  the  years  1895  to  1903: 

Internal  Revenue  Internal  Revenue  Per  cent  collected 

Year  United  States  New  York  in  New  York 

1895 $143,246,077  $19,090,723  13  per  cent. 

1896 146,830,615  21,620,471  15  per  cent. 

1897 146,619,593  18,420,767  13  per  cent. 

1898 170,866,819  21,058,569  12  per  cent. 


*  The  taxes  went  into  effect  July  1,  1898. 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  293 

Internal  Revenue  Internal  Revenue  Per  cent  collected 

Year                                                 United  StaUs  New  York  in  New  York 

1899 273,484,573  46,634,981  17  per  cent. 

1900 295,316,108  46,475,135  16  per  cent. 

1901 306,871,669  49,789,698  16  per  cent. 

1902 271,867,990  38,694,831  14  per  cent. 

1903 230,740,925  26,749,648  12  per  cent. 


An  examination  of  the  above  table  discloses  the  fact  that  the 
total  internal  revenue  receipts  increased  after  the  imposition  of 
the  war  taxes  by  approximately  $100,000,000. .  This  increased 
yield  was  due  not  only  to  the  stamp  taxes,  but  also  to  the  increased 
rates  upon  the  normal  sources  of  internal  revenue.  At  best  we 
can  attribute  not  more  than  $75,000,000  of  the  increase  to  the 
federal  stamp  taxes. 

The  percentage  of  the  total  revenue  taxes  collected  in  New  York 
from  1895  to  1903  averaged  about  13  per  cent.  If  we  assume  that 
this  percentage  would  hold  for  that  part  of  the  internal  revenue 
taxes  collected  from  the  stamp  taxes  the  yield  of  stamp  taxes  in 
New  York  State  during  the  Spanish-American  War  period  would 
have  been  about  $10,000,000.  This  estimate  is  probably  too  high, 
and  at  best  it  can  be  said  to  be  only  very  rough. 

STAMP  TAXES  UNDER  THE  FEDERAL  EMERGENCY  REVENUE  ACT 

The  present  Emergency  Revenue  Law  imposes  stamp  duties  on 
the  following  fifteen  miscellaneous  sources : 

I.  Documents  Subject  to  Stamp  Duties  and  Rates 

1.  Bonds,  debentures  or  certificates  of  indebtedness  on 

each  $100  face  value  or  fraction  thereof 5c 

2.  Sales  or  agreements  to  sell  per  $100  face  value.  ...  5c 

3.  Sales  of  products  at  exchanges  per  $100 Ic 

4.  Promissory  notes: 

Not  exceeding  $100 2c 

Each  additional  $100 2c 

5.  Express  or  freight  shipments  on  manifest  or  bill  of 

lading Ic 

6.  Telegraph  and  telephone  messages : 

Where  charge  is  over  1.5  cents Ic 


294  STATE  OF  NEW  YORK 

7.  Indemnity  bonds 50c 

8.  Certificates  of  profits  per  $100  face  value 2e 

Of  marine  damages.  .  . 25c 

Of  any  other  description lOe 

9.  Contract,  brokers'  note  or  memorandum  of  sale  of  any 

goods  or  merchandise,  stocks,  bonds,  etc lOc 

10.  Conveyances  of  real  property,  when  consideration  is 

greater  than  $100  and  less  than  $500 50c 

For  each  additional  $500 50c 

11.  Custom  house  entries  when  value  of  goods  is  less  than 

$100 25c 

•Between  $100  and  $500 50e 

Entry  or  withdrawal  of  any  goods  from  bonded  ware- 
house    50c 

12.  Foreign  Passage  Tickets: 

Exceeding  $10  in  value $1  00 

Between  $30  and  $60 300 

Greater  than  $60 5  00 

13.  Power  of  attorney  or  proxy lOe 

General  power  of  attorney 25c 

14.  Protest 25c 

15.  Seats  in  palace  or  parlor  car le 

The  yield  of  these  taxes  for  the  period  beginning  December  1, 
1914  and  ending  June  20,  1915  was  $20,494,475.  This  covers 
of  course  only  seven  months.  Assuming  that  the  tax  will  continue 
to  yield  at  the  same  rate  we  should  receive  for  the  entire  year 
approximately  $35,000,000.  Assuming  that  the  New  York  per- 
centage of  the  total  internal  revenue  receipts  during  the  Spanish 
War  period  would  hold  for  the  present  Federal  Emergency 
Revenue  Tax,  namely  16  per  cent.,  we  may  estimate  that  stamp 
taxes  equivalent  to  the  present  federal  stamp ,  taxes  would  pro- 
duce approximately  $5,600,000. 

CONCLUSIONS  TO  BE  DRAWN  FROM  THE  ABOVE. 

In  attempting  to  use  the  statistics  of  the  yield  of  stamp  taxes 
of  France,  England,  Germany,  and  the  Civil  War  period  in  the 
United  States  we  found  so  many  conditions  substantially  different 
from  those  in  New  York  at  the  present  time  that  it  was  necessary 


JOINT  LEGISLATIVE  COMMITTEE  ON  TAXATION  295 


to  make  so  many  assumptions  as  to  vitiate  the  value  of  our  esti- 
mates based  upon  these  sources.  We  must  fall  back,  therefore, 
upon  the  results  of  the  Spanish- American  War  taxes  and  the  pres- 
ent Federal  Emergency  taxes.  We  find  that  in  1898,  under  one  of 
the  most  drastic  stamp  duties  ever  imposed,  New  York's  share  of 
the  total  collection  could  not  have  exceeded  $10,000,000.  Since 
stamp  duties  imposed  by  the  State  could  never  hope  to  cover  such 
a  broad  range  of  items,  it  would  be  too  much  to  hope  that  the  State 
of  New  York  could  raise  as  much  as  $10,000,000.  Should  the 
State  duplicate  the  present  Federal  Emergency  Revenue  Act  it 
could  not  hope  to  raise  more  than  $5,600,000. 


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